IndexIQ, a subsidiary of New York Life Investments, has debuted its first actively managed semi-transparent ETFs with the introduction of two funds targeting US-listed large-cap growth stocks.
Justin Kelly, CEO and CIO of Winslow Capital.
The IQ Winslow Large-Cap Growth ETF (IWLG US) and IQ Winslow Focused Large-Cap Growth ETF (IWFG US) have been listed on NYSE Arca with expense ratios of 0.60% and 0.65%, respectively.
The funds harness the NYSE’s ‘Actively Managed Solution’, a semi-transparent structure that enables managers to avoid having to disclose daily portfolio holdings while maintaining the tax efficiency, liquidity, and lower costs typically associated with regular ETFs.
It does this through the use of a proxy portfolio that is designed to closely track an ETF’s performance but has a different composition and weighting than the fund’s actual holdings.
The proxy portfolio reflects the economic exposures and risk characteristics of an ETF’s actual portfolio. It closely replicates the intraday performance of the ETF while mitigating the risk of front-running.
The ETF’s actual holdings are disclosed on a monthly basis with a 30-day lag.
Investment approach
Both ETFs are sub-advised by Winslow Capital Management, a specialist in growth equity strategies with more than $30 billion in assets under management.
Day-to-day operations of the ETFs are led by Justin Kelly, CEO and CIO, with support from portfolio managers Patrick Burton and Peter Dlugosch.
Winslow Capital employs a ‘no preferred habitat’ investment approach, allocating across three different, yet complementary, types of growth companies: consistent growth, dynamic growth, and cyclical growth. This approach means the ETFs will have the flexibility to shift away from traditional growth stocks, a feature that investors may appreciate considering the recent pull-back in the technology sector.
Security selection is driven by a bottom-up approach that seeks out companies with the potential for above-average future earnings and cash flow growth. Eligible holdings will typically be companies with identifiable and sustainable competitive advantages, strong management teams, and improving fundamentals driving long-term shareholder value.
Both ETFs are non-diversified which means they can invest a larger percentage of assets in a smaller number of companies, allowing the portfolio management team to express conviction in their best ideas.
IWLG typically invests in a portfolio of 45-55 stocks, allocating 25-40% across each of the three types of growth companies. IWFG, however, delivers Winslow’s highest-conviction strategy by investing in just 25-35 stocks, allocating as much as 60% to a particular growth category.
Ian Forrest, Head of IndexIQ, said: “We are excited to be partnering with Winslow Capital to continue to expand our line-up of equity ETFs in our ongoing efforts to provide investors with a wide range of products to help meet their investment needs. Our investors are always our highest priority, and we are pleased to be able to share with them Winslow’s longstanding experience with large-cap growth investment options.”
Justin Kelly, CEO and CIO of Winslow Capital, added: “As active managers, we are continually seeking to identify areas of the market that provide opportunity while still managing risk appropriately. After the recent correction in growth stocks, we believe long-term investors will find this to be a compelling entry point.”