Executive Summary: PRIMECAP Odyssey Discovery ETF is built in the same vein as PRIMECAP’s mutual funds, but with a different focus: virtually no giant stocks, about two-thirds of assets in small and micro-sized companies and more health care and industrials. In taxable accounts, it’s where I’d put new PRIMECAP money; in retirement accounts, it’s a complement to the PRIMECAP funds you may already own.
The wait was longer than I expected, but PRIMECAP Odyssey Discovery ETF (POMG) launched on October 21—giving us a tax-friendly PRIMECAP-run fund.
It’s been said that one shouldn’t look a gift horse in the mouth. But I’m going to do just that.
Every stock in this ETF is a PRIMECAP pick. But the mix is different enough that where you hold it determines its role. Next to a PRIMECAP mutual fund, it’s a complement. In a taxable account, it’s a tax-smart stand-in—at least until PRIMECAP brings more of its strategies to the ETF format.
The PRIMECAP Approach, Briefly
PRIMECAP Management’s funds have been a mainstay of the IVA Portfolios for three decades. For the full story, start with my deep dive into what sets PRIMECAP apart. Then read about the firm’s long history with Micron Technology and its transition to the next generation of portfolio managers.
The short version: Each of PRIMECAP's funds has several portfolio managers, and each portfolio manager runs an independent sleeve of each fund, so even with eight managers on the new ETF, nothing is decided by committee. Analysts run smaller sleeves on their own, so by the time they’re promoted, they’ve proven themselves with real money on the line.
The result is portfolios that look nothing like an index fund. As I like to say, different only guarantees different results, not better ones. But at PRIMECAP, different has meant better over time, with patience the price of admission.
The First Few Weeks
It’s early, but Odyssey Discovery ETF is off to a good start. Since its launch on October 21 through November 6, the ETF gained 6.3%, putting it ahead of PRIMECAP’s mutual funds, which dropped between 1.9% and 5.7%. Over the same stretch, 500 Index (VFIAX) fell 4.3%.
Of course, that’s a couple of weeks, so I am not going to read much into it. What matters more is that investors are showing up. As of Monday’s close, the ETF had $74 million in assets.
(If you saw the fund listed as “PRIMECAP Odyssey Discovery ETTG” on Vanguard’s site, you weren’t imagining it. A few of you flagged it to me, and I passed it along to Vanguard. The company says a third-party data provider had entered the name incorrectly, and it’s now been corrected.)
The Inside Scoop: Smaller Stocks, By Design
Odyssey Discovery ETF’s managers have built a classic PRIMECAP portfolio: 66 stocks, with the top 10 accounting for about a third of assets. That’s conviction and diversification at the same time.