Victory Capital Management has enhanced its suite of smart beta ETFs by launching a new fund targeting higher-quality, growth-oriented US large-cap equities.
Mannik Dhillon, President, Investment Franchises and Solutions, Victory Capital.
The VictoryShares Free Cash Flow Growth ETF (GFLW US) is now listed on Nasdaq with an expense ratio of 0.39%.
The fund tracks the Victory Free Cash Flow Growth Index, selecting constituents from a universe of the 1,000 largest US-listed stocks. Financial companies, real estate investment trusts, and firms with negative earnings or free cash flow yield are excluded. From the remaining eligible stocks, the 400 largest progress to the next selection phase.
The methodology focuses first on free cash flow yield, a critical measure of financial performance calculated as operating cash flow minus capital expenditures. This metric reflects the cash a company generates after maintaining or expanding its asset base, highlighting its ability to enhance shareholder value. Free cash flow is less prone to manipulation compared to other financial metrics, providing a more reliable measure of corporate fundamentals.
The index narrows its focus to the 150 companies with the highest free cash flow yield, from which it then evaluates growth metrics—such as sales trends, EBITDA trends, and consensus long-term growth projections—to derive a growth score. The 100 companies with the highest growth scores are selected for the final index.
Constituents are weighted using a blend of their total free cash flow and share price momentum over the trailing 12 months. Individual stock weights are capped at 4%, while sector weights are limited to a maximum of 45% or 20% above their weight in the initial universe.
GFLW becomes the latest addition to Victory’s growing suite of free cash flow-focused ETFs, joining the $1.6 billion VictoryShares Free Cash Flow ETF (VFLO US), which targets a broader range of US companies, and the $170 million VictoryShares Small Cap Free Cash Flow ETF (SFLO US), focusing on small-cap stocks.
Mannik Dhillon, President, Investment Franchises and Solutions, Victory Capital, commented: “Given the favorable response from financial advisors and clients to both VFLO and SFLO, the addition of a free cash flow alternative that sits on the growth side of the style box was a natural evolution of our free cash flow suite.
“GFLW builds on the innovative methodologies used by VFLO and SFLO and allows investors to capitalize on companies with attractive free cash flow profitability and strong growth prospects in the large-cap growth allocation of their portfolios.”