Zacks Investment Management has stepped up to the ETF launchpad with a product focused on companies with consistent earnings growth through recession periods.
The Zacks Earnings Consistent Portfolio ETF (ZECP) launched Tuesday on Cboe Global Markets. Its primary goal is to build a portfolio of between 50 and 120 U.S. companies that are forecasted to have the lowest earnings volatility over the next three years, particularly those that display earnings growth in turbulent economic times.
The fund excludes financial, energy, utility, precious metal and commodity companies, and will not consider the 150 largest industrial sector companies.
In an interview, Managing Principal Mitch Zacks said the fund aims to give investors access to companies that have a track record of consistent earnings growth within varying economic conditions and changes to their industry’s competitive landscape.
“A lot of investors spend a tremendous amount of time trying to understand fundamentally what's going on in the business and trying to predict what's going to happen in the future with the business in terms of identifying those companies with this sustainable competitive advantage, where they can make profits regardless of what's going on,” he said.
ZECP will begin with an expense ratio of 0.55% through the end of August 2022, but will rise to a hefty 1.12% fee afterward. That high cost is likely a function of the fund’s quarterly rebalancing and active management. Zacks also reserves the right to make snap changes to the portfolio based on major corporate actions, such as a merger or acquisition announcement.
Return To ETFs
This is the first fund to feature Zacks as its issuer. The Chicago-based firm has lent its name and index construction strategies to as many as 13 ETFs over the years through multiple issuers, but several have closed between 2015 and 2020. Prior to Tuesday’s launch, its name was only connected to the Invesco Zacks Multi-Asset Income ETF (CVY) and the Invesco Zacks Mid-Cap ETF (CZA), which have a combined $353 million in assets.
Zacks’ last launch with its name attached to a fund was in January 2015 with the ETFS Zacks Earnings Large-Cap U.S. Index Fund (ZLRG) and ETFS Zacks Earnings Small-Cap U.S. Index Fund (ZSML). It also provided an index for the Summit Water Infrastructure Multifactor ETF (WTRX) for its launch in August 2016.
Those three funds folded approximately two years after their respective launches.
Mitch Zacks said his firm has plans for future ETF launches but is currently focusing on the rollout of ZECP before turning toward launching other products.