Paradice launches ‘one-of-a-kind’ active mid cap ETF

Paradice Investment Management has become the latest fund manager to enter the active exchange traded fund (ETF) market, repackaging its actively managed Australian Mid Cap Fund into ETF format to better appeal to financial advisers and direct investors.

Currently listed on Cboe, the Paradice Australian Mid Cap Fund – Active ETF (M1DS) leverages its ‘one-of-a-kind-in-Australia’ underlying strategy that has already recorded over $2.8 billion in institutional investments, a further $103 million in unlisted retail investments and returned 9.79 per cent annually since its inception in 2006.

Paradice Investment Management Managing Director, David Paradice, said the ETF launch reflects industry and client feedback, given the surging momentum of active ETF adoption and the interest in the underlying strategy’s diversification benefits and its “dynamic market exposure”.

“Australian mid caps, those ranked between 50 and 100 on the ASX, [are] a “sweet spot” in Australian equities that [are] often overlooked. Mid caps are where investors can access some of the highest quality, fastest-growing companies on the ASX,” Fund Co-Portfolio Manager, Jordan Woods, said.

“Over the past 3, 5, and 10 years, the S&P/ASX Mid Cap 50 Index has been the strongest-performing part of the Australian equity market on a median rolling returns basis – consistently outperforming both the ASX 50 and the Small Ords indices. Over the last decade the Mid Cap 50 Index outperformed the ASX 50 by 1.7% per annum and Small Ords index by 4% per annum.

“The mid cap segment captures the ‘survival of the fittest’ dynamic — benefiting from high-performing small caps graduating into the index – companies that have moved beyond the concept stage, have established competitive moats and were now scaling into new markets – while also providing opportunities to invest in turnaround stories from former top 50 companies.”

Co-Portfolio Manager, Jovana Gagic, said mid caps offered untapped diversification opportunities for investors.

“In the last 12 months CBA alone has driven 26.8% of the top ASX 50 returns and over the last five years more than 50% of the ASX 50 index returns have come from the big four banks and financials, making portfolios with ASX 50 exposure vulnerable to sector concentration risks,” she said.

“Mid caps in contrast, deliver a more balanced sector mix with no single security contributing more than 8% over the past five years. From healthcare and technology to industrials and consumer services, the sector diversity gives investors exposure to more growth engines and less single sector risk. This broader spread provides access to sector diversity, uncovers growth trends across a variety of areas.”