Growth investment manager Fred Alger Management (Alger) has launched a new US equity ETF designed to deliver a systematic approach to investing in innovation.
Brad Neuman, Director of Market Strategy at Alger.
The Alger Russell Innovation ETF (INVN US) has been listed on NYSE Arca with an expense ratio of 0.55%.
The fund is linked to the Alger Russell Innovation Index which focuses on identifying the most innovative companies within the US large and mid-cap Russell 1000 Index. The goal is to capture opportunities in companies developing or benefiting from new products, services, technologies, or advancements that the broader market has not yet fully recognized.
The construction process begins by removing the bottom one-third of stocks based on free cash flow margin over the previous four fiscal quarters. Free cash flow margin is a financial metric that measures how efficiently a company converts its revenue into cash.
Next, the remaining stocks are ranked by their R&D expenditures as a percentage of enterprise value. The top 50 ranked stocks are selected and equally weighted, with each holding comprising 2% of the index.
The index is fully reviewed and rebalanced each quarter.
Brad Neuman, Director of Market Strategy at Alger, commented: “Innovation is accelerating change for businesses and transforming the economy, which means investors must think and act differently. One way to take advantage of this change is to allocate assets to innovation, which we believe has the potential to be an important component of investors’ portfolios. A fundamental change in how businesses pursue growth is upending conventional accounting practices, creating a need for new approaches to bring innovation out of the shadow of financial statements and into an accessible investing vehicle.”
Sebastian Lancetti, Head of Index Research for the Americas at FTSE Russell, added: “The US equity market has transformed over the past decade due to the rise of investments in intangible assets. Companies now derive value from intellectual property, R&D, data, and human capital, replacing physical asset-heavy industries. However, this rapid growth has led to rich valuation multiples and market concentration, especially among large-cap leaders. Looking ahead, identifying the next wave of winners requires a discerning approach, focusing on companies with the capacity to both invest in innovation and deliver tangible economic results. The Russell 1000 Index ensures broad market representation, industry diversification, and future-proofing against emerging trends.”