K2 AM plans expansion of RE strategy

K2 Asset Management expects to launch exchange traded funds (ETFs) with a “number of additional managers” in the future, as part of a responsible entity (RE) strategy for the business.

In an address to shareholders issued to the Australian Securities Exchange (ASX), chair Campbell Neal, said the firm ran a service for REs which assisted external managers to launch and run exchange traded funds (ETFs).

This allowed the firm to capitalise on its proprietary skill base that it used on its own funds to be used with other fund managers. There were several additional managers that it expected to launch ETFs or transition funds in the near future, he said.

Neal said: “Continuing to grow the RE offering for external managers is an area we are concentrating on and are confident will increase in the future. K2 has the processes, IT, capabilities and long-term experiences with the financial backing to fulfill this role and we believe this is an area where long-term sustainability will be achieved.

“The majority of partnering discussions we are having with external managers also involve the launching of an associated ETF. That offering is unique in that it provides the manager with a one-step shop including ASX admission, iNAV calculation, market making and market disclosure.”

In its FY21 result, the firm said performance fees from its five funds increased from $709,857 to $2.4 million but management fees decreased from $1.9 million to $1.4 million. Total revenue was $4.46 million.

Net profit after tax was $215,762 while funds under management and advice were $1.4 billion. This had been helped by the firm’s re-engagement with asset consultants which opened distribution channels and opportunities.

“One of the key stepping stones for the past 12 months was the re-engagement of asset consultants and specifically the K2 Australian Small Cap fund receiving an investment rating from Lonsec,” Neal said.

“These ratings are the key to growth of most retail funds, they open distribution channels and opportunities.

“The K2 Australian Small Cap fund has not only delivered strong investor returns but its ETF structure, certainly points to increased FUM in the future. We need to continue to engage these consultants and work towards greater presence on platforms and with financial planners.”