There seems to be a fair amount of interest in this IT, so I thought I’d start a thread. I’m sure it’ll be added once IBKR get with the programme.
Although it piqued my interest, I won’t be investing for a few reasons. Firstly, I generally try to avoid thematic/faddish investments, which feel as if they have been dreamed up by marketeers.
And secondly, the fees are pretty darn steep at 1.43% ongoing, not including transaction costs. I think I remember reading that there is a 15% performance fee attached too.
Lastly, I have fair exposure to SpaceX already through SMT and USA.
Don’t let me put you off though. I’d be interested to hear other people’s cases for investing.
I’m interested purely by name. I haven’t researched the underlying holdings yet - how long have those companies ran for, where do they sit amongst their peers, do I already have exposure to them and so on.
I would be keen to see people’s thoughts/research.
On the performance fee part - there is no benefit to being a long term investor if you don’t time entry right. If I read correctly, the performance hurdle is 8% each year of the high watermark. Anything above that gets charged the 15% performance fee. If the performance isn’t met, then the high watermark is only increased about 1.44% a year.
So if it potters along at a quid for 5 years, then the watermark increases to £1.07 plus 8% a year so £1.16 before you get charged a ‘performance fee’.
If it increases in value by 7% steadily a year, so in year 5 it’s worth £1.4, you won’t have paid any performance fees.
Timing your entry to this one is key.
Imo, there should not be a high AMC plus additional performance fee.
Edit. Now available on InteractiveBroker so hopefully 212 can add:
I missed the part about the 8% hurdle, that does soften the blow significantly.
I’m also yet to do any serious research on the holdings, so it would be interesting to hear from anyone who has done a bit of a deep dive.
Ultimately, I think the main reason I avoid these thematic funds is to mitigate against myself.
You could make a compelling case for investing in this space, but I could make an equally good argument for cloud computing, AI, clean energy and any number of other themes.
As you say, timing entry would be key and I think thematic funds generally encourage trading. I also feel like I don’t know enough, and nor will I, to allocate serious money to such focused strategies.
I like to keep things simple too, so I know what my allocations are to cyclicals etc, and a rag bag collection of themes would muddy the water.
I feel more comfortable going with cheaper, less constrained funds like SMT. In the end, I’d rather have say 1% of my portfolio invested in one good bet like SpaceX than hold a broad basket.
In a similar vein, I don’t see much point holding a semiconductor ETF, with 30-40 holdings, when you could just buy NVDA and ASML.
