The Natixis Vaughan Nelson Mid Cap ETF (VNMC), debuted earlier this month, making it one of the newest entrants to the fray of active non-transparent ETFs (ANTs), but with its mid-cap exposure, it could also be one of the more compelling ideas in the still young ANT space.
The Natixis Vaughan Nelson Mid Cap ETF takes advantage of temporary information and marketplace inefficiencies in the mid-cap universe to find opportunities to invest in companies at valuations materially below their long-term intrinsic value. The fund invests in companies within the market capitalization range of the Russell Midcap® Value Index at the time of purchase. Chris Wallis (CEO & CIO), Dennis Alff and Chad Fargason are the named portfolio managers.
Mid caps could be an ideal arena for ANTs to gain traction.
Mid-cap companies are slightly more diversified than their small-cap peers, which allows many mid-sized companies to generate more consistent revenue and cash flow, along with providing more stable stock prices. Additionally, they are not so big that their size would slow down growth. Increased mergers and acquisitions activity could be just what mid-caps need to catch up to large- and small-cap stocks.
Venturing into Mid Caps With VNMC
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 may expose them to more volatile short-term moves, but middle capitalization stocks and related ETFs may be just right. Middle capitalization stocks, or sometimes referred to as the market’s sweet spot, could help investors achieve improved risk-adjusted returns.
“Vaughan Nelson seeks to take advantage of temporary information and marketplace inefficiencies across the market capitalization range to find opportunities to invest in companies at valuations materially below their long-term intrinsic value,” according to Natixis.
The mid-cap category has also outperformed their larger peers, but with lower volatility than small caps. Moreover, the returns of mid-cap stocks have also beaten those of small-cap stocks during the trailing three-, five-, and 10-year periods, with lower volatility.
For more on active strategies, visit our Active ETFs Channel.
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.