GCQ Funds, a hedge fund led by Doug Tynan, former operator at VGI Partners, has entered the Australian ETF market with the launch of its Global Equities Complex ETF on the ASX. This marks a shift from traditional listed investment companies (LICs) towards the increasingly popular exchange-traded fund (ETF) model, which has been gaining momentum in Australia’s investment landscape.
LICs have faced well-documented challenges, particularly the issue of substantial discounts between their trading price and the value of the underlying assets. These funds often face pressure from activist investors and have struggled to address these disparities. However, the demand from retail investors and their financial advisors remains high, with a strong appetite for high-performing funds.
The new GCQ ETF represents a growing trend among Australian fund managers to introduce exchange-traded funds, offering easier access to a wider pool of investors. The ETF market has experienced substantial growth, driven in part by self-managed super funds seeking more efficient ways to access global investment opportunities.
GCQ’s flagship fund, which returned an impressive 33.9% for the year ending January 31, has outperformed the MSCI World Index by 5.9%. With a track record of success since its inception in July 2022, the fund’s performance has helped solidify its appeal. At GCQ, Tynan has made notable investments in companies such as luxury goods leaders Richemont and Hermes, as well as key players in the payments sector like Visa and Mastercard, pushing the firm’s total assets under management to over $1 billion.
Stephen Higgins, GCQ’s head of distribution, explained that the firm has witnessed increasing interest from advisors and stockbrokers seeking to offer their clients exposure to the fund’s holdings via the ASX. The surge in retail capital flowing into ETFs in recent years has only reinforced the firm’s decision to introduce an active ETF, a move that has long been part of their strategic vision.
The rise of active ETFs has become a significant trend among Australian fund managers. Many, including Magellan Financial’s Airlie Funds Management, Investors Mutual, Munro Partners, and Perpetual Asset Management, have introduced similar products. These ETFs are particularly popular with financial planners due to their accessibility, efficiency, and pricing transparency.
While ETFs offer clear advantages such as liquidity and lower investment minimums, Morningstar’s Steven Le cautioned that market volatility could cause an ETF’s trading price to diverge from its underlying asset value. This discrepancy can impact returns, particularly if investors transact during intraday periods of heightened volatility.
Nevertheless, Higgins emphasized the benefits for financial advisors, noting that clients often prefer a professionally managed global strategy, rather than investing directly in individual stocks. This approach frees clients from the day-to-day responsibility of monitoring a diverse global portfolio, an effort that requires significant resources and expertise.
In a similar vein, Firetrail Investments recently launched its Australian Small Companies Fund Active ETF, which has already seen strong investor inflows. Patrick Hodgens, Firetrail’s managing director, reported that the ETF has attracted comparable flows to its established unit trust, which has been available on platforms for a longer period. The new ETF has already accumulated over $300 million in assets.
As more Australian fund managers embrace the ETF model, it is clear that ETFs are becoming an increasingly attractive option for investors seeking flexibility, transparency, and access to high-quality global strategies.
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