The wait is over.
PRIMECAP Management’s first ETF—the PRIMECAP Odyssey Discovery ETF (POMG)—began trading today.
I’ll explore the new ETF in more detail later, but below are the key points you need to know.
(You can find the fund’s landing page here. Though PRIMECAP still has some cleanup to do, as a few data points look off.)
A Distinct PRIMECAP Portfolio
The managers have a wide hunting ground, investing primarily in mid-sized and small stocks.
Based on the prospectus, the managers can invest in companies with market values ranging from roughly $24 million to $125 billion. Just as important, they won't be forced to sell successful investments simply because those companies grow into large-cap territory.
Because the managers buy mid-sized and smaller stocks, you won’t find names like Alphabet (Google), NVIDIA, Amazon or Eli Lilly in Odyssey Discovery ETF’s portfolio. But the real standout is Micron—it’s the largest holding, accounting for more than 10% of assets, in Capital Opportunity (VHCOX) and PRIMECAP (VPMCX), but you won’t find it in the new ETF’s portfolio.
Over time, as the next crop of the managers’ winning stock picks grows from smaller to larger companies, Odyssey Discovery ETF’s portfolio may converge with its siblings. But for now, this is the most distinct PRIMECAP portfolio on the market.
The Portfolio Managers
PRIMECAP has named eight portfolio managers to run the ETF (listed below), but this isn't management by committee. Each manager runs their own sleeve of the portfolio independently, allowing multiple investment perspectives to coexist inside a single fund.
- Theo A. Kolokotrones
- Alfred W. Mordecai
- M. Mohsin Ansari
- James Marchetti
- Anil Gopala
- Greg T. Molinelli
- Jared N. Herzikoff-Cornell
- Shanshan Jiang
Kolokotrones, Mordecai, Ansari and Marchetti are familiar names to long-time PRIMECAP investors. They've been managing the firm's funds for years.
As expected, Joel Fried, who is retiring at year-end, is not in the mix.
The four newer names may be less familiar to investors—though I expected Gopala and Molinelli were next in line to be officially named portfolio managers. But that doesn't mean they're newcomers. The four newly named managers have spent 13 to 21 years at PRIMECAP and have managed real money within the firm's system for years. They represent the next generation of investment talent.
Cheap—But Not Vanguard Cheap
Odyssey Discovery ETF charges an annual fee of 0.68%. That’s not “Vanguard cheap,” but it roughly matches the firm's private-label mutual funds and is a reasonable fee for top-tier management.
A Separate Fund
The new ETF is a separate fund from the other PRIMECAP-run funds. You cannot do a tax-free conversion into the ETF. In other words, if you sell your PRIMECAP-run mutual fund in a taxable account to buy the new ETF, consider the tax implications first.
What Is Jeff Doing?
For the past 15 years, PRIMECAP Odyssey Aggressive Growth (POAGX) has been my only PRIMECAP-run fund. And, as I’ve told you, it’s been my largest position. But now, after years of speculation and months of waiting, a tax-friendly, PRIMECAP-run ETF is here.
That changes things. Here is where I’ve landed: