Being Different From Index ETFs Can Add Value

What’s inside an ETF really matters. This is an argument I’ve been making for more than a decade. However, with the growth of alternatively weighted index ETFs and actively managed products, this has become even more notable.

Advisors continue to tell VettaFi that they are concerned about the long-term prospects for equities. During a webcast last week with Innovator ETFs, 63% of respondents said that they expect an annualized return for their equity allocation to be between 5%-10%, with just 29% expecting double-digit returns. The iShares Russell 1000 ETF (IWB) was up 17% year to date as of September 15.

VettaFi is hosting an Equity Symposium on September 21, starting at 11 a.m. ET inclusive of two hours of continuing education credit. At 12:45 p.m. ET, I’m moderating a discussion with Columbia Threadneedle and Capital Group. Other sessions will focus on large-caps, mid-caps, and sector strategies.

What You Own and Don’t Own Matters

The Columbia Research Enhanced Core ETF (RECS) invests in Russell 1000 stocks rated favorably by the firm’s quantitative investment models. The goal is to eliminate the unattractive stocks by focusing on high-quality, undervalued companies with a catalyst. RECS owns just 374 companies and does not have positions in some mega-caps like Berkshire Hathaway and Tesla, according to VettaFi Research. It owns Apple and Microsoft though.

RECS has a low 0.15% expense ratio. On a three-year annualized basis, RECS rose 12.5%, compared with 10.6% for IWB.