Today, Lakehouse Global Growth Fund (ASX: LHGG) will begin trading on the ASX as an exchange-traded fund (ETF).
Since its inception in 2017, the Fund has significantly outperformed its benchmark. It returned 17.4% per annum compared to 11.8% for the benchmark.
For the past seven years, Lakehouse Global Growth Fund has operated as an unlisted managed fund with a minimum investment of $25,000.
Its debut as an ASX-listed ETF provides greater access to retail investors by removing the barrier of a substantial minimum investment. Like any other ASX ETF, it can be traded during market hours.
What is the Fund's investment philosophy?
Lakehouse Global Growth Fund invests in mid-to-large growth companies across global markets.
It runs a relatively concentrated portfolio with just 20 high-conviction holdings. However, it is diversified across various sectors and geographies.
Its portfolio includes e-commerce provider MercadoLibre (NASDAQ: MELI), which is often described as the "Amazon of Latin America." Other prominent holdings include Japanese cloud-based software business Sansan and Dutch global payments innovator Adyen. It also includes Sweden's top online residential property portal, Hemnet, often described as the sleek Nordic counterpart to Australia's REA Group.
How the Fund is approaching market uncertainty
There's no denying that the past week has been especially tough for ASX investors. Many major global markets recording their worst week since 2020.
In this context, Lakehouse's strategy could be especially appealing to long-term investors.
Commenting on the decision to launch this ASX ETF at this time, Lakehouse Global Growth Fund Portfolio Manager Nick Thomson noted:
Today's investors are inundated with short-term news headlines and market noise. Our long-term, high-conviction approach allows investors to focus on companies with clear strategic advantages built around loyalty, network effects, and intellectual property.
Expanding on this strategy, Portfolio Manager Nick Thomson suggested 'loyalty' refers to businesses focused on customer loyalty and competition. Meanwhile, 'network effects' describe businesses that provide a product that increases in value as the number of users grows. And 'intellectual property' means intangible assets provide longevity and pricing power but are not recognised on the balance sheet.
To illustrate these three strategic advantages in practice, he detailed the investment case for MercadoLibre:
MercadoLibre's competitive edge – grounded in network effects across its online marketplace and digital payments platform – has allowed it to increase revenue ninefold over the past five years. Given the early stage of e-commerce adoption and the large, underbanked population across Latin America, we believe its best days still lay ahead.
MercadoLibre is a great example of a company with network effects. At its core, it operates a two-sided marketplace platform, connecting buyers and sellers. As the number of buyers grows, sellers are incentivised to join as they gain access to a larger customer base, which in turn, incentives more buyers to join as the value proposition improves. This creates a virtuous cycle, and ultimately, the value of the platform compounds exponentially as it scales.
ASX ETFs have never been more popular
Since first arriving on the market 24 years ago, ASX ETFs have soared in popularity. ETFs offer advantages that continue to attract investors through varying market conditions.
Between July 2001 and November 2024, funds under management for the Australian ETF industry grew at a compound annual growth rate of 43%. According to The Australian, ASX ETF FUM is set to exceed $300 million sometime this year.
Several popular passively managed ASX ETFs, which track their respective indices, have had a tough start to the year. Many have declined more than 10%.
Over the past five years, active ETFs have been on the rise, increasing from 37 in 2019 to 125 in 2024.
In this market, an actively managed ETF like Lakehouse Global Growth Fund could be positioned for significant outperformance.
Through active management, its fund managers can allocate funds towards the best opportunities, whether that be different sectors or geographies. With over 60% of the fund's revenue located outside the United States, investors are insulated against the volatile US market. Give that the S&P 500 just booked its worst two day decline since April 2020, this strategy appears to be paying off.
