First 'Forensic Accounting' ETF Planned | ETF Trends

Exchange Traded Concepts, an exchange traded fund service provider that helps money managers quickly market investment ideas, has partnered with Index Deletion Strategies in filing for an ETF that red flags and excludes companies with problems in their financial statements.

According to Rock Hill Herald, John Del Vecchio, CFA, an Index principal and forensic accountant, who currently manages the Active Bear ETF (NYSEArca: HDGE), will oversee the proposed Forensic Accounting ETF (FLAG).

FLAG will try to reflect the Del Vecchio Earnings Quality Index, which follows 500 large-cap stocks rated A through F based on Del Vecchio’s “earnings quality” method. The underlying index will excluded F-ranked stocks and individual holdings will be weighted by earnings quality.

The ETF will be passively managed, but it will follow the new growing class of rules-based or “intelligent” indexing strategies that mimic actively managed styles.

“Our expertise in using forensic accounting at the core of our investment analysis has already been validated for ETF investors on the short side,” Del Vecchio said in the article. “They will soon have the opportunity to capitalize on our earnings quality-based strategy in a long-only index structure too.”

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Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.