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An investment for millennials: LionGlobal’s Disruptive Innovation Fund

Sarah Voon

‘Disruptive’ is an oft-used buzzword in the start-up scene for a couple of years now and while it tends to be overused, it is still one that the new wave of tech entrepreneurs constantly turn to when explaining their life’s mission. 

But whether or not you feel this term is being used too liberally, what cannot be denied is that innovation – the foundation on which disruption is born – has changed the way people live, work and play. 

What the world has seen and experienced thus far, in terms of innovation, have been tremendous improvements to the current level of technology, most of which have had a significant impact on our everyday lives. From the way we communicate, to the way we consume media and entertainment, to the even the way we purchase goods and services, there is a veritable laundry list of the various aspects in which there has been a fundamental change in how we go about our day. 

With the sheer amount of value-creation that these innovative companies have brought to our lives, surely then it is time to consider whether they make a worthy investment case. After all, if we are already buying stocks in established quality blue-chip companies, why not allocate some funds to these up-and-coming titans of tomorrow? 

The long-term uplift in value of some of history’s disruptive innovators are there for all to see. Just as an example, when Amazon first went public back in 1997, its stock price was just $18 per share. Now, it’s trading at over 40 times of that, at about $800 per share.

So if you do not want to miss out on riding the wave of disruptive innovation, now for the first time ever, retail investors here can be involved in the growth of these disruptive companies via investing in the LionGlobal Disruptive Innovation Fund (LGDIF). 

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.”

 

A portfolio of 100 global disruptive innovators 


Source: Thinkstock/Getty Images

Designed to be a fund that is passively managed, the LGDIF will comprise approximately 300 to 500 disruptive innovators. This will include players in software innovation (eg. digital shopping, user-sharing), breakthroughs (eg. artificial intelligence, big data and analytics) and hardware Innovation (eg. automation, self-driving cars). 

Investors should note that LionGlobal would only consider 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 is sufficiently diversified, the investment scope is further reduced to an “index” of 100 stocks using a five-factor screening process. 

These five factors are:

  • market capitalisation
  • volatility
  • sales growth
  • earnings-per-share growth 
  • price-to-sales ratio

These factors are equally weighted, similar to some other factor-based investing approaches.

LGDIF looks like it would appeal to investors who are looking for beta (market) exposure to a portfolio of the global stocks of disruptive companies. Investors are cautioned that LGDIF is not an absolute return fund or an all-weather fund.

 

Truly accessible for all


Source: Thinkstock/Getty Images

The LGDIF is truly accessible to all with a low barrier to entry, since its minimum investment amount is a mere S$100. Investors can also use cash or SRS monies. 

In addition, from now till 28 March, 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 though, retail investors will only be able to subscribe to the ‘A’ share class of the fund. 

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. For more information, visit www.lgidirect.com.sg.

(By Sarah Voon)

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