Savana Asset Management, a relatively new player in the funds management space, launched its first exchange-traded fund (ETF) – the Savana US Small Caps Active ETF (ASX: SVNP) – in November last year, setting itself apart by focusing on US rather than Australian equities.
Speaking to InvestorDaily’s sister brand, Money Management, Savana associate director Samuel Atkinson acknowledged that active ETFs have had a tough time gaining traction, with global flows favouring passive strategies. But he said the firm’s own back testing suggests it has built a high-performing product capable of outperforming the benchmark.
Savana is now planning to roll out a couple of new ETFs in the short to medium term – including an Australian and a global small-cap strategy – with an eye to building a suite of up to 20 ETFs over the next few years.
Longer term, the firm is aiming to become a version of Betashares – but focused entirely on active management.
Atkinson credited Betashares’ rise to the global pivot towards passive investing and said Savana sees a gap in the market for a tech-driven, active alternative.
“We would like to be the next Betashares, but for active ETFs, they have a fantastic brand and have grown their FUM to $50 billion in 15 years. We have the opportunity to replicate that as an active manager,” Atkinson said.
“We’ve watched our passive competitors climb to record FUM levels simply by replicating market indices. We believe that our digital-first active model has the potential to surpass their success by delivering superior performance at scale.”
The firm’s digital-first edge lies in its proprietary automated platform, which analyses over 60,000 global equities daily to identify undervalued companies and reduce human bias, Atkinson said.
“There’s countless examples in our portfolio of the algorithm making bold, fearless decisions about when to buy and sell stocks and, as much as we can, we try not to intervene with that unless there’s fraud or an error in the data,” he said.
Savana US Small Caps Active is currently outperforming its S&P 600 benchmark by 7.0 per cent.
“What we’re seeing in live trading is exactly what we observed in testing – strong downside protection when markets fall, and aggressive upside capture during rallies,” Atkinson said.
“In a volatile environment, our automated strategy stays disciplined, fully invested and focused on exploiting fear-driven mispricing.”
Passive v active
While passive ETFs have been more popular among investors due to their far lesser cost, Atkinson said Savana believes there is a “big opportunity” for an active manager to beat the market.
“We’ve had a really good decade and a half for passive returns, but that’s not assured going forward,” he said.
The plan for Savana’s growth is a strategic partner that, as Atkinson put it, can “brings funds through the door” to help the firm scale.
“The story we tell our investors is that we can be the next Betashares with better returns.”
Betashares currently offers a range of actively managed ETFs, spanning various asset classes, including fixed income, equities and income-focused strategies.
