Peter Switzer, the name and face of Switzer Daily, the Switzer show on Sky News, Switzer Financial Planning, the Switzer Super Report, Switzer Home Loans, Switzer Business Coaching and an often entertaining twitter feed, seemingly having ticked off every other component of Wealth Management is now putting his name to a new Exchange Traded Managed Fund, the Switzer Dividend Growth Fund (SWTZ).
With the vast majority of new listings over the last year or so attempting to carve out their own niche by focusing on global markets, certain sectors, long/short investing or leverage and derivative strategies, SWTZ gets back to basics, with the fund aiming to be a low cost Australian fund with a focus on regular (quarterly) dividend yield for investors. It's obvious who the target market is for the fund, with the prospectus even stating that Self Managed Super Funds are the targets for the fund. The fund's objective is to:
...provide Australian resident investors with tax effective income and long term capital growth by investing in a core portfolio of blue chip Australian shares. The portfolio will be managed with the aim of delivering capital returns in line with the market while providing investors with an attractive income stream that is franked to a material extent.
The fund will be listed as an Exchange Traded Managed Fund (ETMF), also known as an Actively Managed ETF. We took a look at ETMFs in a previous post so we won't go into detail, but essentially the fund will be open ended (like an ETF) but actively managed (like a LIC or traditional managed fund). This gives investors the ability to buy units in the fund on the ASX at close to the exact Net Tangible Assets of the fund. The fund will be managed by Contango Asset Management, with Peter Switzer being one of the members of the investment committee, along with George Boubouras, Charlie Aitkin and Paul Rickard.
With our generous imputation credit system, dividend focused funds are a crowded space in Australia. There's 11 ETFs that focus on dividend yield available on the ASX, however these all employ rules based smart beta strategies and are not active like the Switzer offering. Of course many LICs offer high dividend yield, but this is due to the tax structure of the fund (where the fund pays their own tax and collects franking credits, more info here) rather than the underlying investments. As a result, the Switzer offering, with its quarterly distributions may fill a gap in the portfolios of those investors seeking active management, exposure to high yielding companies, broad market exposure and regular distributions without having to worry about the premiums and discounts to NTA that occur in the many LICs that operate in this space.
The Switzer fund is raising $10m in seed capital to get the fund going with the manager covering all costs of the listing. Investors interested in participating can do so here. This IPO is open until 17 February 2017, however once the fund lists on the ASX, investors will be able to buy units on market through their broker. Management costs for the fund are 0.89% p.a. with no performance fees.
Update 28/02/2017 - SWTZ has now began trading on the ASX, raising around $50m seed capital to get going. You can check out its current price, performance history and trading volumes here.
This post was prepared with publicly available information available from Switzer Asset Management. ETF Watch did not receive any payment from Switzer, nor ensorses the merits on the fund. We recommend investors seek professional financial advice before investing.