Chicago-based Kovitz Investment Partners has made its ETF debut by launching an actively managed fund providing high-conviction global equities exposure.
Mitchell Kovitz, Principal and Founder of Kovitz Investment Partners.
The Kovitz Core Equity ETF (EQTY US) has been listed on NYSE Arca with an expense ratio of 0.99%.
The fund has come to market with around $1.2 billion in assets due to Kovitz converting two existing mutual funds into the ETF along with over $500 million of assets from separately managed accounts.
Mitchell Kovitz, Principal and Founder of Kovitz Investment Partners, said: “We believe this move allows Kovitz to opportunistically enter the ETF business and continue its history of bringing attractive solutions in an evolving marketplace.
“We’re glad to offer our core equity strategy through a tax-efficient vehicle to our clients and other value-oriented investors. The ETF structure is well suited to our active management approach and can support the long-term portfolio goals of our clients.”
Kovitz’s core equity strategy, which the firm has offered to its clients through separately managed accounts and a mutual fund for 25 years, is designed to be the cornerstone of an investor’s equity exposure with a focus on compounding capital.
Kovitz selects constituents for the ETF from the S&P 500 Index, the firms making up the top quartile of the S&P Midcap 400 Index in terms of market cap, and, for non-US-based companies, the S&P Global 100 Index.
The selection process begins with a qualitative assessment to narrow the investable universe, emphasizing companies that are industry leaders, offer stable products, have low capital requirements, and have experienced and competent management teams with ownership stakes.
Kovitz then utilizes quantitative analysis to further reduce the investable universe, emphasizing companies with high returns on capital, high correlation between earnings and cash flow, and low financial risk.
According to Kovitz, the firm’s investment approach is based on the methodology pioneered by Benjamin Graham and further developed and modified by Warren Buffett and Charlie Munger of Berkshire Hathaway. Specifically, Kovitz focuses only on stocks selling at a significant discount to its estimate of underlying intrinsic value, a strategy that seeks to generate substantial gains when the analysis proves correct while minimizing downside risk if a particular investment thesis is flawed.
The ETF is expected to hold between 30 to 40 companies at any time.