Validea Capital Management’s new exchange-traded fund, the Validea Market Legends ETF (VALX), mines the stock picks of legendary investors and, so its founder says, in a more thoughtful way than the competition.
This means that Validea’s Chief Executive Officer John Reese is pitching the two-month-old ETF as a more up-to-the-minute way to capture smart money’s stock picks than either the Global X Guru ETF (GURU | B-51) or the Direxion iBillionaire ETF (IBLN | F-58).
Truth be told, Reese told ETF.com that VALX shouldn’t really be compared with either GURU or IBLN. To begin, the latter two both make use of 13F filings to inform allocations. Validea’s ETF meanwhile is an actively managed security that makes use of a proprietary system of analyzing stock picks that have no 45-day delay the way mining 13F filings does.
ETF.com: Let's talk about your ETF, VALX. What's the initial response to it?
Reese: We've had an excellent response. In the first three weeks, we gathered more than $6 million in assets, and now it’s almost $18 million.
ETF.com: And are you prospecting internally—existing clients switching from one wrapper to the other to get into the whole tax efficiency? Or are these new clients?
Reese: Part of our marketing strategy, where it makes sense, is to convert a handful of clients. And that's where we expect about $15-20 million of assets initially to come from.
ETF.com: And apart from that, it's going to be new external clients and new money?
Reese: It will be. We have tens of thousands of followers who have accumulated over time because they've read my books or they followed my blog, or they've read my articles on Forbes or TheStreet.com. And all of them are interested in the system and are, therefore, potential prospects to actually use VALX.
And by the way, about 20-30 percent of those people are financial professionals. And therefore, they're able to spread the word and actually use it for their clients, not just for themselves personally.
ETF.com: So that would make you an ETF strategist of sorts?
Reese: Perhaps, but honestly, we haven't focused on doing that. Some financial professionals have discovered this process and they like it. But I haven't set out to be an ETF strategist so much, as I'm still sticking to my knitting and doing my thing.
ETF.com: Now, as I look at your strategy, it's tempting to compare it with either Global X’s GURU or the iBillionaire ETF IBLN. Is there anything wrong with that comparison?
Reese: It’s tempting to make the comparison, but it would be incorrect. iBillionaire and GURU are using 13F filings of hedge funds of billionaires. The way we see it, the information they're gathering is old and dated, due to the delay in reporting.
By the time they know what stock a particular investor owns, they don’t know if that investor is in or out of that particular position; whereas the system used in VALX covers the stock picks in real time using our computer models. So that's one very key difference.
ETF.com: Take me there; I'm not following the logistics of your system.
Reese: Every single day, our models are examining the market to find which stocks would be of interest to the stock-picking strategies of the legendary investors—the Peter Lynches, the Benjamin Grahams.