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The ETF industry just got more interesting. On February 7, 2026, Mohnish Pabrai's concentrated value fund converted to an ETF structure, trading under the ticker WAGN. For anyone who follows value investing, this is worth paying attention to, and not just because of who's behind it.
The Irony You Can't Ignore
Mohnish Pabrai has spent two decades building a reputation as one of the most disciplined value investors in the game. The man who paid $650,100 for lunch with Warren Buffett. The “shameless cloner” who openly studies and replicates the strategies of Buffett and Munger. The investor who runs portfolios with 5-10 holdings, not 500.
ETFs, by their nature, are democratic. They're about accessibility, liquidity, and intraday trading. They're the opposite of the patient, concentrated, multi-year holding philosophy that defines Pabrai's approach.
Yet here we are.
What WAGN Actually Is
This isn't a new launch – it's a conversion. The Pabrai Wagons Fund launched as a mutual fund in September 2023 and has now reorganised into ETF format. Current assets sit around $97 million, with the institutional share class (WGNIX) showing YTD returns of 1.78% as of early February.
The strategy remains unchanged: extremely concentrated (typically 5-15 positions), focused on high-quality businesses trading below intrinsic value, and designed for long-term compounding. Think metallurgical coal miners, offshore drillers, Turkish airports, Indian financials, the unloved corners of markets where value hides.
The expense ratio of 0.90% (after fee waivers) isn't cheap by passive standards, but for an actively managed, highly concentrated strategy, it's competitive. For context, Pabrai's hedge fund historically charged the traditional 2-and-20 structure.
Why This Matters for the Industry
1. Active Management Finding New Vehicles
The conversion signals something broader: top-tier active managers are recognising that the ETF wrapper isn't just for passive beta anymore. The tax efficiency, liquidity, and distribution advantages of ETFs make them compelling vehicles for active strategies, even ultra-concentrated ones.
2. The Democratisation Play
Pabrai's hedge fund was only accessible to qualified investors. The mutual fund lowered that barrier, but mutual funds carry their own limitations. The ETF structure opens the strategy to any investor with a brokerage account. This is the Amazon Prime-ification of investment access, strategies that were once gated are now available with a single click.
3. Portfolio Implementation Question
Here's the tension: WAGN holds 10-15 stocks at most. Many investors already own some of these names directly. How does WAGN fit into a diversified portfolio without creating unintended concentration risk? This is the challenge with all focused equity ETFs – they're satellite positions at best, not core holdings.
4. The Fee Compression Reality
At 0.90%, WAGN sits in an interesting middle ground. It's expensive compared to broad market beta, but dramatically cheaper than hedge fund access to similar strategies. The value proposition depends entirely on execution: can Pabrai's approach generate sufficient alpha to justify the cost? His track record suggests yes, but past performance isn't a guarantee.
The Contrarian Angle
What's fascinating is the timing. We're in the midst of one of the most momentum-driven markets in recent memory. The Magnificent 7 dominate indices. Passive flows continue to dwarf active. Yet here comes an ETF that explicitly bets against crowded trades, hunting for value in despised sectors.
Pabrai's current positioning includes significant exposure to coal (metallurgical, not thermal – important distinction), offshore energy services, and other cyclical value plays. These are the names that growth investors won't touch and ESG screeners actively exclude.
Is this contrarian genius or stubbornly fighting the tape? Time will tell. But the setup is interesting – if there's ever a mean reversion in market leadership, strategies like WAGN are positioned to benefit.
What Investors Should Consider
If you're evaluating WAGN:
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This is a satellite position, not a core holding. The concentration risk is real.
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You're betting on Pabrai's stock-picking ability and his willingness to hold through volatility. Review the fund's holdings quarterly – there will likely be names that make you uncomfortable. That's part of the strategy.
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The turnover is relatively low (69% as of last report), but this isn't a buy-and-forget index fund. Active management means things change.
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Tax efficiency should be better than the mutual fund structure, but concentrated portfolios can still generate capital gains distributions.
What this signals for the market:
We're seeing a maturation of the ETF ecosystem. The next generation of ETF products won't just be passive, rules-based, or factor-tilted. They'll include genuinely active strategies from named managers with long track records. WAGN is part of this evolution.
The question is whether retail investors have the patience and discipline for truly concentrated value strategies. Historically, most don't. Fund flows chase performance, and concentrated value strategies can underperform for years before inflecting. We saw this dynamic destroy many value funds during the 2010s momentum rally.
The Bottom Line
WAGN is a fascinating addition to the ETF universe – not because it's revolutionary in structure, but because of what it represents. A legendary value investor adapting his approach to modern distribution channels. A test case for whether concentrated active strategies can work in an ETF wrapper. A contrarian bet in a momentum-obsessed market.
Whether it succeeds or not, the launch tells us something important: even the most disciplined, old-school value investors recognise that accessibility matters. The wrapper has changed, but the philosophy remains the same.
For the ETF industry, this is another data point in the ongoing transformation from passive vehicles to active strategy platforms. For value investors, it's a liquid way to access a high-conviction approach that was previously gated.
The market will decide if that access is worth 90 basis points.
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