New Provisus funds chase higher returns at ETF prices

The web-based investment service features active management and a pay-for-performance pricing scheme

New Provisus funds chase higher returns at ETF prices

With investors expected to more closely watch the fees they pay and the returns they get, Provisus Wealth Management has released a series of funds that offers lower fees and a tighter focus on performance.

The Toronto-based portfolio manager’s new series, Transcend, is a web-based service made available directly to mid-market investors, according to a Canadian Business report. Each fund in the series charges clients a base management fee of 0.25% of their investment per year, and collects 20% of the amount by which it beats its corresponding benchmark every quarter.

“Everything I do—everything we’ve done here—is to be different,” said Provisus President and CEO Chris Ambridge. “With traditional commission or fee-based approaches, we think clients are paying probably a little too much for what they’re getting in terms of results and support.”

Ambridge, along with various other portfolio managers and investment professionals, believes that steep fees hinder investors from achieving benchmark-beating returns. He said that ETFs and robo-advisors never quite match the market returns after they deduct fees, which average 0.32% for robos and 0.63% for ETFs. Many mutual fund managers, meanwhile, are not keen to prioritize maximized returns because they get paid based on the client portfolio’s size.

The firm can afford to charge such a low base management fee because a significant chunk of its services are automated and online. However, the fund still as an edge because it is maintained by active fund managers, who are paid based on performance and therefore have an incentive to chase returns. Transcend is maintained with the same investment philosophy that Provisus follows in general, which Ambridge calls “active indexation.”

“We want to match the risk characteristics of the underlying benchmark, not take undue risks, and add value through security selection,” he said.

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