The world is constantly disrupted by new innovations and the ways people live, work and play have seen tremendous improvement because of positive disruption.
From smartphones to online shopping, digital media streaming to home-cleaning robots, the average person in Singapore may have enjoyed the benefits of disruptive innovations but seldom benefited financially from the expanding sales of the companies that brought about these innovations.
For the first time, retail investors can now participate in the growth of these disruptive companies through investing in the LionGlobal Disruptive Innovation Fund (“LGDIF” or “the Fund”). Newly launched by Lion Global Investors (LGI), the LGDIF is the first easily-accessible fund in Singapore that invests in disruptive innovators, defined as "companies that change the traditional way an industry operates, especially in a new and effective way”.
“We are so consumed by the effectiveness of a new tool or a new service that we forget to ask ourselves, ‘Can I benefit from this financially?’” says Mr Gerard Lee, LGI’s Chief Executive Officer. He adds: “As users and adopters of these innovations, we should be actively looking at how we could also participate in the growth of these companies.”
LGI is of the view that disruptive companies present potential investment opportunities for the investors in the medium-to-long term and a possible way to participate in the growth of these companies is through a passive approach to investing.
Designed to be a fund that is passively managed, the Fund’s investment universe comprises approximately 300 to 500 disruptive innovators, broadly classified according to the three disruptive forces of which their areas of business represent: (1) Software Innovation, which includes digital shopping, user-sharing; (2) Breakthroughs, which includes artificial intelligence, big data and analytics; and (3) Hardware Innovation, which includes automation, self-driving cars. It is worth noting that the investable universe includes only companies that challenge existing business models and whose innovative ideas have been proven and commercialised.
To ensure that the portfolio is practical to manage and the Fund has sufficient diversification, the investment universe is further reduced to an “index” of 100 stocks using a five-factor screening process. These five factors are, namely: market capitalisation, volatility, sales growth, earnings-per-share growth and price-to-sales ratio. These factors are equally weighted, similar to some other factor-based investing approaches.
In LGI’s view, LGDIF will appeal to investors who are looking for beta (market) exposure to a portfolio of the global stocks of disruptive companies. Investors should note that the Fund is not an absolute return fund or an all-weather fund.
To encourage millennials to start investing early and to attract those who believe that disruption is a long-term megatrend from which they could benefit financially, LGI has set the Fund’s minimum investment amount at $100, and investors can invest in the Fund using cash or SRS monies. In addition, from now till 28 March 2017, retail investors will be able to subscribe to the ‘I’ share class of the Fund at a lower annual management fee of 0.68 per cent per annum. After 28 March 2017, retail investors will only be able to subscribe to the ‘A’ share class of the fund. For more information on the annual management fee, investors should refer to the prospectus.
The Fund is currently available on the platforms of LGI’s online distribution partners, Fundsupermart.com, dollarDEX and POEMS, and all fund information is accessible through LGIDirect - a newly launched LGI-specific content platform that contains information about LGI products and connects seamlessly to the transactional functionality of our online distribution partners.