Exchange-traded fund pioneer turned private-equity player Graham Tuckwell says ETF 2.0″will give investors more control of what’s in their tracker funds.
| Exchange-traded funds are on the cusp of a new era in which people will get more control of what is actually in those funds – an evolution the Australian industry pioneer Graham Tuckwell calls “ETFs 2.0”.
Mr Tuckwell is using his London-based private-equity firm ETFS Capital – the only unit of his ETF empire that the 67-year-old has retained, after selling the US, British and Australian businesses over the past few years – to take a punt on his hunch. “But obviously, as the technology gets better and better, and the costs of trading come down – the costs of trading in Australia are very high by world standards – then it can be offered to more and more people, offered to people with a lower and lower minimum amount.”
“I don’t think Australia has seen a new significant ETF provider for half a dozen years or more. The European market is completely closed to new entrants of any size. And the US, they’ve got one or two examples where a new person has come in and been able to make the top 20. But basically, it’s a game for the incumbents, who can do it at scale.
ETFS Capital is avoiding established companies and restricting itself to start-ups. It offers either seed capital or Series A funding, and takes a stake of at least 10 per cent, usually 15 to 25 per cent.Between 2018 and 2020 he and his 12-person team bought $US66 million worth of equity in 13 companies, of which three have subsequently been sold.
He now wants to help more Australian fintechs make the leap, as he did two decades ago, from the local market into the UK, European or US markets. “We just can’t find the ideas. For every 50 to 100 companies we look at, we probably make one investment.”He says the biggest swing factor in deciding whether to make an investment is the person or people involved.
He spends another quarter to one-third of his time on his philanthropic work. This centres on a $100 million venture with the Australian National University that includes a nine-year-old scholarship program.
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