IndexIQ rolled out a pair of nontransparent actively managed ETFs on Thursday that cover the large cap growth segment of the U.S. market.
The strategy underlying the IQ Winslow Large Cap Growth ETF (IWLG) is already offered in a Mainstay mutual fund with nearly $14 billion in assets under management. Meanwhile, the IQ Winslow Focused Large Cap Growth ETF (IWFG) holds fewer stocks, but takes a similar approach.
IWLG comes with an expense ratio of 0.60%, 8 basis points cheaper than its mutual fund counterpart, while IWFG charges 0.65%. Both list on the NYSE Arca.
“We philosophically believe that investing in growth stocks will provide investors the best long term returns because of the compounding of the businesses in the portfolio,” said Winslow CEO Justin Kelly. “At Winslow, we look to invest in the undervalued growth stocks rather than just collect the best growth companies.”
Essentially, IWFG is a more concentrated version of IWLG, with a proxy portfolio that contains 28 securities to IWLG’s 50.
The firm describes its strategy as having “no preferred habitat,” such that it shifts the focus from overvalued technology companies to those it describes as exhibiting dynamic growth, consistent growth or cyclical growth. The strategy favors companies that are underpriced or likely to offer more growth than the market expects. The investment manager says that it is targeting consistent growth in the current environment.
“We believe strongly that this type of portfolio can be your best long term capital appreciation asset. The risk with it has always been that it has a slightly elevated valuation relative to say value managers,” said Kelly. “But now after the correction, a lot of that risk has already [been realized]. Because of the lower starting point on valuation, this is particularly advantageous to be a core holding for investors thinking longer term.”
The funds rely on the NYSE’s Actively Managed Solution model, which relies on a proxy portfolio but discloses its actual holdings every 30 days on a one-month lag.
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