Nascent issuer Parabla in April launched its first exchange traded fund, the Parabla Innovation ETF (LZRD), on the Nasdaq. The actively managed fund seeks long-term growth from U.S. exchange-listed issuers engaged in developmental, disruptive, scaling, and/or refining innovation.
“It’s an innovation fund,” Phillip Hanks, founder, CEO, & CIO at Parabla, told VettaFi. “It’s trying to do a little bit of the Cathie wood thing, but it’s four types of innovation instead of one.”
Hanks described developmental innovation as “new technology that has the potential to disrupt but hasn’t affected the world yet.” Disruptive companies are those in sectors “like the electric vehicle market” that “are making a big impact now.”
Companies in the scaling silo are “getting production numbers up to where it’s effecting a lot of people.”
Finally, firms seen as offering refining innovation includes large-cap companies like Apple that have “a good product and are making a ton of money reiterating on a successful product.”
The fund has a U.S. bias, is multi-cap, multi-sector, and generally consists of 24 to 69 companies. To be considered, holdings must have been publicly traded on a U.S. exchange for at least six months. They must also have a market cap of more than $1 billion at the time of initial investment.
“I think investors got burned with early-stage non-profitable companies,” Hanks said. “People that were investing in these companies saw a precipitous fall in their value. Even if I may miss out on some early opportunities, in my experience, I’d rather be prudent.”
The Next Wood or Buffett
Prior to forming Parabla, Hanks formed an RIA (Black Oak Wealth Management) in 2016. He sold the advisory firm last year to launch and manage LZRD.
“It’s a capital-intensive venture,” he said. “I wanted to scale the strategy that I have been doing.”
As the fund’s manager, Hanks explained that, with LZRD, he’s “trying to buy things that look oversold and selling off things as they seem overbought.”
LZRD carries an expense ratio of 0.69%. Hanks added that LZRD is designed to be in the overlap of a Venn Diagram where YOLO-style opportunistic investing meets Warren Buffet’s disciplined low turnover “sloth” investment style.
“If I can outperform the S&P consistently, on a relative basis, I’d be very happy about that,” he said. “You have to justify an expense ratio that’s higher than an index fund but lower than average for actively managed.
Hanks added: “If we can get an initial boost in AUM, I believe I could be the next Cathie Wood or Warren Buffett. Just hopefully not Jim Cramer.”
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