Respectfully, I completely disagree.
Firstly, your analysis of their quantitative algorithm has not been confined to circa 1% bets - akin to a flip of the coin. Some years up, some years down.
The unlisted fund has been operating utilising the same methodology for over five years - since departing from a fundamental, high conviction fund. It has shown consistent outperformance of the index for 1, 3, and 5 years.
The management fee of .003 is lower than the cheapest index tracking fund in the country. The betashares ETF tracking the ASX200.
Yes, you may potentially pay higher fees, BUT this is predicated on outperformance of the ASX300 index. If the fund simply tracks the index, you are paying an extremely competitive fee of .003.
I believe your central tenet, of investors being worse off due to tracking error and adding volatility could be said for ALL active funds.
The reason I said I was a champion of passive funds, is the fact over 80% of so called experts fail to outperform a simple index, after fees, over the long term.
Accordingly, the argument of people being worse off, and this product being worse than regular index tracking ETFs, could be said for every single active fund. So, I am not sure if it's a fair assessment - unless you apply the same thought process to all active management.
The difference here is that instead of paying circa 1%, or more, for a baseline management fee for simply tracking an index - they get .003.
Similarly, there are still a lot of active managers charging performance fees without a benchmark, or a benchmark based on the overnight rate.
Similarly, I work in the industry and would be extremely hesitant to bet on an active fund manager beating the index - given the odds are well and truly stacked against them. In saying that, this product is a step in the right direction.
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