Passive indexing dominates the exchange traded fund space, but some traditional active fund managers have looked into converting their long-tested strategies into the ETF wrapper.
“Clients ask for it, and we realized that transparency is a virtue. It always has been at Davis. Because of the way we manage money, investing primarily in large liquid securities, having a very long-term time horizon with relatively low turn over, we are uniquely suited to be able to do this,” Dodd Kittsley, Director of ETF Strategy at Davis Advisors, said at the 2018 Morningstar Investment Conference.
Investors may look to a time-tested active approach to potentially enhance returns. For example, the actively managed Davis Select U.S. Equity ETF (NasdaqGM: DUSA), Davis Select Financial ETF (NasdaqGM: DFNL), Davis Select International ETF (NasdaqGM: DINT) and Davis Select Worldwide ETF (NasdaqGM: DWLD) are backed by Davis Advisors’ focuses on long-term opportunities and incorporate the money manager’s judgement experience, high conviction, low turnover, accountability and alignment. The Davis team screens for fundamental characteristics, including cash flows assets and liabilities, and other criteria.
“It’s not based on an index. It’s truly active,” Kittsley said. “It’s based on an investment discipline that’s been around for more than 50 years and a strategy whose track record has outperformed 1, 3, 5,10 and since inception time periods.”
The management team looks to durability, adaptability and resiliency of a company for strong competitive advantages, superior business models, attractive financials and superior free cash flows. They also select those with proven, capable management with a track record of good decisions, intelligent capital allocators and alignment of interests. Additionally, the team focuses on discount to true value by calculating owner earnings to arrive at the true value of a company.
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