Case study of IML Loomis Sayles Global Equity Quoted Managed Fund

By Penny Pryor

IML partnered with Natixis Affiliate Loomis Sayles nearly three years ago to launch the Loomis Sayles Global Equity unlisted fund. They have now just launched the Loomis Sayles Global Equity Quoted Managed Fund (ASX: LSGE), the listed version of that fund, lowering the management fees on the unlisted fund to match the fees on the active ETF.

New CEO at IML, Damon Hambly, spoke to Industry Moves about the logistics of getting that active ETF up and running.

What is attractive about the ETF structure?

We're now seeing growth in active ETFs. Last year, about a third of the flows into ETFs were to active ETFs. So, we're seeing this increasing demand from a various number of clients. We're seeing brokers move a bit more into wealth management in some's a natural progression for them to expand their offering for clients to include managed funds, but by a listed structure.

We see new advisors, the up-and-coming new generation advisors, that are used to working with a younger clientele, who like the idea and the simplicity of dealing with an ETF type structure. Then even just generally, younger investors, if they are able to invest directly with the use of an App, an ETF can be more appealing than maybe an unlisted fund. But for us, it's really about providing choice.

What goes into launching a new product like this?

A lot of work. A lot of research. Understanding what the demand looks like and where you see the trends. Is it going to be a segment that is going to attract flows? Is it going to be a long-term sustainable business? Obviously, you've got to choose the right product.

This is our first active ETF at IML so we're pretty excited about it. But it's a whole new operational challenge and there's been a lot of work across the teams to get that in place.

How did you conduct market research?

With IML we've got such a strong history with the financial advisory segment of the market. So, we spent a lot of time talking to them and listening to them, to understand what they were looking for, for their clients. A big part of market research is speaking to them. And that's not just in terms of deciding where we go with ETFs.

Before we made the decision to bring the Loomis Sayles [unlisted] global equity fund to the market in 2018, we spent quite a bit of time talking to clients, such as advisors, to understand what they were looking for, to help firm up the business plan.

Of course, we do the usual things, we look at statistics, and data, competitor performance and relevant peer performance. But it's very much also about leveraging those relationships the IML team has built over the last 20-plus years.

How did you decide on service providers?

Some of the providers we've chosen they're already providing services to us for our unlisted funds, so we know them well. We also looked at competitors to see which providers were being used and we met a range of them to interview them and to come to a shortlist. But where Natixis was very helpful was making sure we're covering off all the risks.

What do you think is unique about this offering?

You've got a global perspective of a Boston-based manager. It's also style agnostic. And what we found when we do blending analysis with competitors is that the Loomis Sayles Global Equity Fund is a complementary fit to those other dominant managers. And also, it works well as a core.

The other aspect, which I think is quite unique, is that Loomis Sayles also has a very big fixed income business. So, the team has access to research and IP from other teams across the fixed interest business, which means they have access to information on companies across the balance sheets - not just the equity side, but also the debt side of balance sheets.

What is the fee structure of the product?

The fee structure is going to be 99 basis points all up. Australia is a very competitive market in terms of pricing, probably the most competitive globally, so we wanted to make sure that the product was competitively priced. Importantly, it has no performance fee, so it's just the base fee.

And to keep it all simple, we've also reduced the pricing of the unlisted fund, which was launched nearly three years ago, to the same price as the listed fund which is a great benefit for our existing investors.