Ballast Asset Management (“Ballast”), a fundamental equity manager, launched the Ballast Small/Midcap ETF (NYSE: MGMT) on Thursday. This is one of the first ETFs to trade small capitalization equities actively.
In Ballast’s opinion, small and mid-cap companies comprise a market segment that is both inefficient and poised for growth. Ballast seeks stellar management teams leading high-quality, smaller companies positioned to sustain growth and achieve success in the face of economic uncertainty.
MGMT is the newest entrant into a space that has traditionally been dominated by passive index ETFs. The investment team behind MGMT employs a rigorous research process to evaluate small and mid-cap companies and seeks to avoid companies that may not perform well.
In contrast, passive small-cap ETFs may invest in low-quality and potentially distressed companies alongside higher-quality counterparts. Ballast’s process is designed to uncover and invest in higher-quality companies led by outstanding management teams, which they believe will offer investors the opportunity to diversify their assets and potentially earn exceptional returns.
“Investing in great management teams has been a hallmark of our approach for years,” said Ragen Stienke, Founder and Portfolio Manager of Ballast Asset Management, the advisor to MGMT. “Our team dedicates significant time toward building relationships with management teams who have demonstrated an ability to act in the best interest of shareholders.”
Proper Management For MGMT
Ballast’s investment process scrutinizes compensation structures, assesses management’s alignment with shareholders, and evaluates responsible capital deployment.
“In today’s economic environment, we are particularly interested in executives who can understand and effectively respond to macroeconomic and industry shocks,” added Stienke. “First and foremost, we strive to minimize losses and downside volatility. Further, we seek to invest in such a way that our investors benefit when a company successfully pivots in the face of change.”
MGMT retains the flexibility to continue to own high-quality compounders as they successfully execute their strategies.
“When our work indicates a company is poised for success, we want our investors to benefit as long as the reward to risk balance remains in their favor. We don’t want to be forced to sell simply because of a market capitalization limit,” Stienke commented. “Other small cap strategies are often required to sell their best performers before intrinsic value is fully realized.”
For more information on Ballast’s ETF offering, visit www.mgmtetf.com.
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