In a move reflecting trends seen in the wider asset management industry – namely the shift from active to passive – the Innovator IBD 50 Fund (FFTY US) has switched from being actively managed to purely passive index-tracking.
Innovator Capital Management’s IBD 50 ETF has switched from being actively managed to passively managed.
The ETF, which is managed by Innovator Capital Management, will now absolutely track the IBD 50 Index.
Prior to the change, the IBD 50 Index had been used as the ETF’s benchmark, with portfolio managers having some discretion to re-weight constituents according to a proprietary ranking system.
The IBD 50 is compiled and published by the respected Investor’s Business Daily and targets growth stocks within the total US equity universe of approximately 7,000 equity securities that trade on the NYSE or Nasdaq.
After removing stocks with low liquidity, small size, and poor price momentum characteristics, the remaining stocks are scored based on the following 11 factors: earnings per share, relative price strength, sales margin return on equity, accumulation distribution, industry group relative strength, growth in quarterly earnings versus next quarter consensus estimates, 3-5 year annual growth rate versus next year’s consensus estimates, quarterly sales growth versus next quarter consensus estimates, acceleration in quarterly sales or earnings, liquidity, and annual return on equity.
Each stock’s individual factor scores are aggregated and the 50 companies with the highest composite score are included in the index. A tiered weighting system is employed so that securities with the highest scores are given a higher weight.
The current largest holdings are LAM Research, TAL Education Group, Nvida and Arista Networks.
The index is heavily weighted toward the information technology sector, which makes up 65.0% of the portfolio, with consumer discretionary (21.0%) and financials (5.1%) coming in a distant second and third.
FFTY has returned 34% in the 12-months to the end of September 2017. The fund has a gross expense ratio of 1.13% and a net expense ratio of 0.80% due to a waiver in place until May 2019.
It was launched on the NYSE Arca in April 2015 and has assets under management of $250m.