US-based issuer GraniteShares has added a new string to its bow with the launch of a US equity ETF on NYSE Arca.
William Rhind, Founder and CEO, GraniteShares.
The issuer, which debuted in May 2017, previously only offered commodity-linked funds.
The newly launched GraniteShares XOUT US Large Cap ETF (XOUT US) offers access to a broadly diversified large-cap portfolio while providing exposure to the theme of technological innovation.
The fund counters traditional strategies, however.
Rather than trying to select firms that are proven disruptors in their fields, the ETF flips this investment paradigm by seeking to avoid companies deemed most likely to suffer from technological disruption over the long term.
Methodology
The fund tracks the XOUT US Large Cap Index which was created through a partnership between EQM Indexes and newly formed indexing firm XOUT Capital.
The index uses XOUT’s proprietary quantitative model to analyse a universe of the 500 largest stocks in the US, looking at seven factors to identify whether companies are being positively or negatively affected by technological innovation.
The seven factors are revenue growth, workforce growth, capital deployment, share repurchases, profitability and deposit growth (for banks), earning sentiment, and management performance.
Each stock is assigned a score based on a weighted average of its performance across the seven factors, relative to other firms in the universe. The 250 companies with the lowest scores are eliminated, and the remaining constituents are weighted by market capitalization. Reconstitution and rebalancing occur quarterly.
The resulting index has some notable sector differences when compared to the S&P 500. Its largest exposure is information technology at 32% (up from 22% in the S&P 500), followed by healthcare at 20% (vs. 14%), consumer discretionary at 14% (vs. 10%), communication services at 12% (vs. 10%), and industrials at 8% (vs. 9%). Financials is down from 13% in the S&P 500 to 6%, while consumer staples has dropped from 8% to 5% and energy from 5% to just 1%.
David Barse, Founder and CEO of XOUT Capital, commented, “Disruption is one of the most significant, forward-facing risks impacting investors and companies today. The XOUT approach is simple – look to cut out the losers and you’re left with a portfolio that may be better positioned to outpace the broader market. Having spent most of my career in the asset management industry trying to build portfolios of winners, I now know it may be much easier to simply exclude losers.”
Will Rhind, Founder and CEO of GraniteShares, added, “GraniteShares is thrilled to partner with David Barse and XOUT Capital on this unique investment idea. A first-of-its-kind ETF, XOUT firmly aligns with our mission of offering innovative investment solutions that challenge conventional thinking. With XOUT, more important than what you put in your portfolio is what you leave out.”
The fund comes with an expense ratio of 0.60%.