Alpcot Capital Management, a leading asset manager focused on investing in Eastern Europe, has announced the launch of Europe’s first actively managed equity ETF.
The physically-backed Alpcot Active Greater Russia ETF aims to achieve long-term capital appreciation through investing in the securities of issuers based in the ‘Greater Russia’ region, i.e. Russia and other CIS region states.
The Luxembourg-domiciled UCITS IV-compliant ETF has been listed on NASDAQ OMX in Stockholm, and is targeting retail and institutional investors locally, but is also open to professional investors across Europe. The fund combines active management of its holdings with the liquidity, transparency and tradability benefits of an ETF.
The fund’s portfolio is separated into disclosed portfolio securities (DPS) and non-disclosed portfolio securities (NDPS). Alpcot will disclose daily the portfolio’s DPS, which will typically amount to as much as 80% of the portfolio, but will not reveal the NDPS on a daily basis. This partial disclosure will enable Alpcot to employ effective and active investment management and mitigate the risks of being exposed to front running and portfolio replication.
The high degree of DPS will facilitate an efficient secondary market, but Alpcot will also provide a real-time indicative intra-day NAV as an estimate of the NAV per share over the course of the trading day. This will further improve the price mechanism on the secondary market.
The fund will have a management fee of 1.4% per annum. While this is high for the ETF industry, the fee is competitive for actively managed Russia-focused equity funds.
Commenting on the launch, Alpcot partner Bjorn Lindstrom said: “The Alpcot Active Greater Russia Fund is Europe’s first truly actively-managed equity ETF, and refutes the traditional argument that active fund management is impossible to combine with stock exchange distribution.”
“Alpcot’s approach captures the best of both worlds of investing, and is one that stays loyal to the original ETF concept by offering investors real-time trade execution and a high degree of transparency, while also allowing for effective active management to take place.”
“From an investment perspective, the current turbulent markets and depressed equity valuations in the greater Russia region offer an excellent opportunity for long-term investors who are seeking an entry point to this fundamentally attractive market. However, it is also a less researched market, and the true value of opportunities in the region can only be exploited by experienced active managers.”
Alpcot is an independent investment management company launched in 2005 by a group of investment professionals with significant experience of investing in Eastern Europe. The company has over $300m in assets under management across asset classes, and has offices in London, Moscow and Kiev.
While this is the first European active ETF to focus on Russia, there are already a number of European-listed index-tracking funds available:
HSBC MSCI Russia Capped ETF (HRUB)
iShares MSCI Russia Capped Swap ETF (RUSS)
Credit Suisse MSCI Russia ETF (CSRU)
DB X-trackers MSCI Russia Capped Index ETF (XMRC)
Comstage MSCI Russia 30% Capped TR ETF (ETF118)
The MSCI Russia Capped Index is based on the MSCI Russia Index, which offers a representation of the Russian market by targeting all companies with a market capitalisation within the top 85% of the Russian investable equity universe. For the capped indices, at construction and at each rebalancing, if the weight of the largest constituent in the index is greater than 30% (25% for DB X-tracker fund), its weight will be capped at 30% (25%).
RDX Source ETF (RDXS)
The Russian Depository (or RDX) Price Return Index is a capitalisation-weighted price index and is made up of American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) of Russian ‘blue chip’ stocks, which are continuously traded at London Stock Exchange (LSE).
RBS Market Access DAXglobal Russia Index ETF (M9SJ GY)
The DAXglobal Russia Index represents nearly 80% of the Russian economy and comprises 30 of the largest Russian stocks by market capitalisation. The Index is open to up to 30 ADRs/GDRs. The Index weighting is based upon the market capitalisation and average daily turnover of the constituents and there is a 10% cap on the weighting of individual constituents.
EasyETF DJ Russia Titans 10 ETF (ERR FP)
The Dow Jones Russia Titans 10 index is comprised of stocks of 10 large companies listed on the Russian financial markets. The stocks are selected according to their market capitalisation.