Lion Global’s smart beta disruption fund returns 16.1% in first six months

(Oct 30): Korean memory chip company SK Hynix and augmented reality firm Shenzhen O-Film Tech Co do not usually make the top 10 lists of technology or disruptive funds. But these two stocks have fuelled the performance of one six-month-old smart beta fund.

The LionGlobal Disruptive Innovation Fund is the brainchild of local fund house Lion Global Investors (LGI). It is the asset management firm’s first smart beta experiment, at a time when active managers are scrambling to grow as investors flock to low-cost exchange-traded funds (ETFs) and other passive investments. According to Credit Suisse, US investors poured US$172 billion ($234 billion) into passive funds in the first nine months of this year. Actively managed mutual funds hold just 18% of US equities, down from 24% in 2007.

“In the active management world, margins are being squeezed. The way to defend [our turf] is to come up with new products that are disrupting the active management space,” says LGI CEO Gerard Lee. Unlike most funds, LGI’s Disruptive Innovation Fund only requires a minimum investment of $100. Lee says the fund aims to entice young professionals, who are more attuned to disruptive technologies in their daily lives. It has a management fee of 1% a year.

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