The specialist player using algorithms for active ETFs
A specialist ETF provider is seeking to become “the new Betashares” with its active ETFs, thanks to its use of algorithms to achieve outperformance.
Savana Asset Management uses an algorithmic platform which analyses over 60,000 global equities to identify undervalued and overlooked companies and mispriced opportunities, removing the human behavioural bias.
The firm’s investment philosophy is threefold, capturing skill via collective intelligence, breadth and efficiency.
Its first active ETF is the US Small Caps Active ETF, which was launched in November 2024 as the firm felt it was a differentiator for them to be in the US rather than Australian equities as well as the larger stock universe in the US. Prior to launch, it had been run as a paper trade since July 2022.
Samuel Atkinson, associate director at Savana, said: “We see a big opportunity in the active space. They have struggled to get off the ground because they struggle to outperform and are expensive compared to passive peers. Our testing has found we are a high-performing product which can beat the benchmark.
“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. In a volatile environment, our automated strategy stays disciplined, fully invested, and focused in exploiting fear-driven mispricing.
“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.”
The management fee on the ETF is 1 per cent and the performance fee is 15 per cent per annum of the outperformance relative to the benchamrk, but Atkinson said he expects these will come down in due course as the company scales up.
Over the next few years, the firm has ambitions to launch as many as 20 ETFs, including an Australian small-cap and a global small-cap one, and looks to Australian ETF giant Betashares as a model to follow. It also plans to team up with a distribution partner that will be able to help the firm to achieve scale.
“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.”
AUTHOR
Laura Dew
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