Boston-based investment management firm Davis Advisors has become the latest player to enter the exchange-traded fund space by launching three new actively-managed ETFs on Nasdaq Exchange. The Davis Select US Equity ETF (DUSA), Davis Select Financial ETF (DFNL), and Davis Select Worldwide ETF (DWLD) all harness Davis’ fundamental bottom up approach in an attempt to select outperforming equities.
Chris Davis, Portfolio Manager and Chairman, Davis Advisors.
The ETFs have low expected portfolio turnover and a strategic long-term time investment horizon. Davis ETFs offer investors the traditional benefits of ETFs in general, which include low costs, tax efficiency, intraday liquidity, and transparency.
Chris Davis, Portfolio Manager and Chairman, Davis Advisors, commented: “Davis ETFs offer a differentiated combination of active stock selection and our proven time-tested investment discipline with the traditional benefits of an ETF.”
The Davis Select US Equity ETF invests in US-listed large-cap equities and is managed by Chris Davis and his partner Danton Goei. It is fairly concentrated with around 20 holdings, representing the firm’s highest-conviction stock selections. Investors may wish therefore to use the fund as a complement to passive, index-oriented strategies, potentially enhancing total returns. The ETF has a total expense ratio (TER) of 0.60%, due to a contractual fee waiver in place until 9 January 2018, and will seek to outperform the S&P 500 Index. The fund’s gross expense ratio is 0.66%.
Compared to its benchmark, as of 13 January 2017, the fund is overweight financials (38.4% vs 15.5%), industrials (15.2% vs 10.3%) and energy stocks (14.1% vs 7.4%) but is significantly underweight the information technology (7.3% vs 20.2%) and healthcare (4.2% vs 13.8%) sectors. Current top holdings include Berkshire Hathaway (9.5%), Amazon (7.4%), Alphabet (7.3%), United Technologies (6.9%) and American Express (6.4%).
The Davis Select Financial ETF is managed by Chris Davis and seeks to select best-of-breed financial companies listed in the US. It also has about 20 holdings. Davis commented: “The financial sector is one of the most attractive areas in today’s market; however, it is vast and inefficient, so we believe selectivity and experienced active management are key to outperformance.”
The fund’s TER is 0.65% due to a similar contractual fee waiver as the Davis US Equity ETF. It will seek to outperform the S&P 500 Financials Index. Compared to its benchmark, the fund is currently overweight diversified financials (48.4% vs 35.9%), insurance companies (28.6% vs 18.6%) and significantly underweight banks (19.9% vs 45.5%). Current top holdings include Markel (6.7%), Capital One (6.1%), Loews (6.0%), American Express (6.0%) and Berkshire Hathaway (5.8%).
The Davis Select Worldwide ETF is a portfolio of globally-listed stocks with about 40 holdings. The fund is managed by Danton Goei and Chris Davis. It has a TER of 0.65%, due to a contractual fee waiver in place until 9 January 2018, and a gross expense ratio of 0.68%. The ETF’s benchmark is the MSCI ACWI Index.
Compared to its benchmark, the fund holds approximately similar exposure to the US but is overweight emerging market stocks (29.7% vs 10.7%) and underweight developed ex-US stocks (13.0% vs 35.8%). Top sectors include consumer discretionary (28.0%), financials (20.5%), information technology (17.6%), energy (15.3%) and industrials (9.8%). Top holdings include Alphabet (6.5%), Encana (5.7%), Amazon (5.0%), Apache (4.7%) and Berkshire Hathaway (4.6%).