Inside Alger's New Active Mid Cap ETF | ETF Trends

Earlier this month, Fred Alger Management, LLC (Alger) entered the exchange traded funds arena with the Alger Mid Cap 40 ETF (FRTY).

The new ETF seeks to invest in 40 high-conviction mid cap growth equities. It’s managed by Amy Zhang. Zhang has been with the firm since 2015 and manages several of Alger’s small- and mid-cap strategies, including the Alger Small Cap Focus Fund, a five-star Morningstar rated fund.

“As bond yields continue to rise, and inflation expectations run high, Zhang is finding even more opportunities these days, especially in the small- and mid-cap spaces where stocks are more likely to benefit from economic growth,” reports Business Insider.

Alger has licensed ActiveShares from Precidian Investments, LLC, enabling the firm to deliver actively managed investment strategies in an ETF vehicle without disclosing holdings daily.

“Armed with the small-cap histories of many mid-cap stocks, Zhang has been able to find quality stocks that have stood the test of time. She shared three long-term stock picks poised to rally as the historic economic reopening accelerates,” adds Business Insider.

A Middle Ground for Investors

As investors look over their equity market exposure, investors may find that large cap stock positions are too big for rapid growth and small caps expose them to more volatile short-term moves. Middle capitalization stocks, sometimes referred to as the market’s sweet spot, can help investors achieve improved risk-adjusted returns.

Mid cap companies are slightly more diversified than their small cap peers, which allows many to generate more consistent revenue and cash flow, along with more stable stock prices. Many are not so big that their size slows down growth.

“Mid-cap stocks have outperformed their large and small brethren in the past 20 years. According to S&P Dow Jones Indices, the S&P MidCap 400 has outpaced the S&P 500 and the S&P SmallCap 600 by an annualized rate of 2% and 0.92%, respectively, since December 1994,” concludes the article. “But mid-cap stocks remain underowned relative to history. Data compiled by RBC Capital Markets showed that though institutional investors recently turned net long on S&P 400 futures, their contracts betting on higher prices relative to those for lower prices remained below 2017 highs of about $5 billion.”

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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.