As more heralded fund managers start actively managed exchange-traded funds, Mario Gabelli (Trades, Portfolio) launched his fund for pet lovers, the Gabelli Pet Parents NextShares (PETZC, Financial), on the Nasdaq Tuesday.
The fund will invest at least 80% of its net assets anywhere in the pet industry, including services and products for pets and their owners (what Gabelli’s filings refer to as “parents”). It may buy shares of pet food, drugs, wellness, medical equipment, recreation and a wide of other companies.
The managers will employ a classic value investing approach, buying shares on the public market that trade below their private market value. They also focus on companies’ free cash flow and long-term trends and look for a catalyst that might boost the business in the future.
NextShares differ from ETFs in that their trading prices are connected to the fund’s next computed net asset value instead of being decided at the time of the next trade. They also are not required to list their full portfolio holdings daily, helping to prevent investors from front-running their trades.
Gabelli sees an opportunity in the $70 billion companion pet market, which it estimates has increased 30% over the past five years. Pet food has soared to $40 billion annually, alongside the vitamins, healthy treats and pet supplies markets, which the firm expects to exceed $15 billion in 2018. Veterinary revenues, driven by diagnostics and therapeutics, should total about $18 billion.
Gabelli Pet Parents NextShares will be Gabelli’s fourth NextShares ETF. It already runs the Media Mogul, Food of All Nations and RBI funds.
Gabelli’s pet addition also brings the list of NextShares exchange-traded managed funds available from leading managers to 18, according to Todd Broms, who co-developed the intellectual property that underpins NextShares. The names include Charles Brandes (Trades, Portfolio)’ Brandes Investments and Sarah Ketterer (Trades, Portfolio)’s Causeway Capital.
On Tuesday, Gabelli’s Pet Parent Fund declined 0.06% to $99.97 per share. His next biggest fund by assets under management, the Media Mogul fund, has returned 5.99% since starting on Dec. 1, 2016, versus the S&P 500 benchmark return of 18.82%.
The Brandes Value NextShares has struggled as well, producing a negative return of 0.18% since inception on Feb. 14, versus a 3.5% return in the S&P 500. Causeway’s largest strategy, the Global Value NextShares, rose 0.70% since launch on April 12, versus a 1.61% in the benchmark.
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