Gotham debuts active S&P 500 value ETF

Jan 7th, 2021 | By | Category: Equities

New York-based Gotham Asset Management has made its ETF debut with the launch of the Gotham Enhanced 500 ETF (GSPY US) on NYSE Arca.

Joel Greenblatt, founder and co-CIO, Gotham Asset Management

Joel Greenblatt, founder and co-CIO, Gotham Asset Management.

Gotham is an equity management firm offering both long-only and long/short investment strategies to institutional clients.

The firm is headed up by founder and co-CIO Joel Greenblatt, who also moonlights as an adjunct professor at Columbia Business School.

Greenblatt runs Gotham with his business partner Robert Goldstein, co-CIO, who previously founded a value and special situation investment partnership managing capital on behalf of institutions and wealthy individuals.

Gotham’s first ETF replicates a fundamentals-driven value strategy it has offered through its mutual fund platform, Gotham Funds, since December 2016.

The strategy seeks to outperform the S&P 500 by selecting and weighting US large-cap equities using a systematic, bottom-up approach based on a proprietary analytical framework.

The approach aims to identify cheaply priced stocks, based on measures of both absolute and relative value, while emphasizing strong fundamentals such as recurring earnings, cash flows, capital efficiency, and capital structure.

Companies that do not conform to Gotham’s valuation methodology, or those adjudged to have questionable financial reporting, will be excluded.

The fund assigns the largest weights to those stocks that are priced at the largest discount to Gotham’s assessment of value while a risk management overlay limits concentration in any single company, industry, or sector.

Daily portfolio rebalancing means that the ETF may engage in frequent trading of securities and display high portfolio turnover.

The strategy has slightly underperformed the S&P 500 since inception, returning 79.44% compared to 81.35% for the US bellwether index (as of 31 December 2020).

The past year has, however, been brutal for value strategies as sought-after but expensive tech stocks drove the bulk of the market’s returns following the initial Covid-19 sell-off. Indeed, Gotham’s strategy delivered a return of 13.48% in 2020 compared to 18.40% for the S&P 500.

The ETF comes with an expense ratio of 0.50%.

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