State Street Investment Management has partnered with Dutch asset manager Van Lanschot Kempen to launch two actively managed smaller companies ETFs, offering investors exposure to concentrated portfolios of US and European stocks.
The funds, which listed on Germany’s Xetra exchange on 10 November, will be managed by Van Lanschot Kempen’s existing team of 10 small-cap specialists, who oversee approximately €3.5bn of assets. Both will typically hold between 50 and 80 companies, selected through fundamental research incorporating valuation and sustainability considerations. They aim to outperform the MSCI US Small Cap and MSCI Europe ex-UK Small Cap indices respectively, rather than closely replicate their composition.
The funds will disclose their holdings daily and are classified as Article 8 under the EU’s Sustainable Finance Disclosure Regulation, meaning they promote environmental or social characteristics.
The launches extend State Street’s growing range of active ETFs and its strategy of partnering with established investment managers to bring their expertise into the ETF market.
Our view
David Batchelor, senior analyst at QuotedData, said: “State Street’s existing global small-cap enhanced active ETF, launched in February, holds between 300 and 600 stocks and uses quantitative signals to guide selection. The new Kempen funds, by contrast, are much more concentrated, giving their managers considerably greater scope to outperform – or underperform – their benchmarks through individual stock selection. Smaller companies are a potentially fertile hunting ground for active ETF managers, given the relatively limited analyst coverage and greater scope for market inefficiencies. However, their lower liquidity and the concentration of the portfolios bring additional risks, while charges of 0.55% and 0.60% are not particularly cheap”.
