New York-based growth specialist Alger has launched its first ETF, the actively managed Alger Mid Cap 40 ETF (FRTY US).

Amy Zhang, Executive Vice President, Portfolio Manager, Alger.

The fund has listed on NYSE Arca and is overseen by seasoned midcap manager Amy Zhang.

The fund utilizes Precidian Investment’s ActiveShares ETF structure which combines the benefits of a traditional ETF with the flexibility and confidentiality of an actively managed mutual fund.

The fund invests in a high-conviction portfolio of US growth stocks, typically concentrated in industries undergoing dynamic change.

Zhang and her team of analysts employ a bottom-up research process in a bid to identify and invest in exceptional companies that can compound value over the long term.

The process homes in on companies with healthy balance sheets, durable business models and solid operating histories that have the potential to double their revenue stream in five years. Companies that fit these characteristics are often leaders in fields with high barriers to entry (so-called wide economic moats) that offer innovative and differentiated technologies and services.

Zhang believes companies undergoing what she describes as ‘positive dynamic change’ offer the best investment opportunities. These include companies realizing high unit volume growth through rapidly growing demand or increasing market dominance, or companies undergoing positive lifecycle change as a result of product innovation, new management or supportive regulations.

Zhang and her team take a patient, long-term view with a three- to five-year investment horizon. This in turn leads to lower levels of portfolio turnover and reduced trading costs.

Under normal circumstances, the fund will invest at least 80% of its assets in midcap companies, defined as those companies that have market capitalizations within the range of companies included in the Russell MidCap Growth or S&P MidCap 400 indices – typically $1 billion to $30bn.

Zhang expects to allocate a significant portion of fund assets to companies conducting business in the information technology and healthcare sectors, although the fund will never invest more than 25% of its assets in any one industry comprising the information technology and healthcare sectors.

Generally, the fund will own about 40 holdings, but this number could vary, such as when a new holding is acquired and it has been deemed in the best interests of shareholders to sell an existing holding over a period of time, instead of immediately selling the position.

As the fund does not publicly disclose its holdings, investors could look to the Alger Mid Cap Focus Fund which is similarly managed by Amy Zhang for guidance on possible portfolio composition. Notable active positions in this fund include Magnite, MercadoLibre, Farfetch, Cloudflare, Penn National Gaming, Invitae, DraftKings, Roku, Cantel Medical and Colfax.

FRTY comes with total annual fund operating expenses (after waiver) of 0.60%.