CastleArk has entered the exchange-traded fund market with its debut ETF, the CastleArk Large Growth ETF (NYSE Arca: CARK). The actively managed ETF targets roughly 25-30 of the largest and most successful growth companies in the market.
The fund’s investment team identifies signs of competitive strength in durable, resilient business models that generate high and enduring returns on capital. The strategy focuses on growth companies that have achieved a sustainable competitive advantage. In addition, its managers use quantitative inputs to actively seek out the precursors to failure and to optimize risk.
CARK charges 54 basis points.
See more: “Large-Cap Growth ETFs Actively Adding Value”
Replicating the Success of Its Large-Cap Growth Strategy
“We’ve had a 20-plus year history as one of the top large-cap growth managers,” he told VettaFi. “But it’s been confined to the institutional separately managed account part of our business.”
Castellini said while the separate account has been successful, the firm “always had questions about having a vehicle” confined to the institutional SMA space. “So, we developed this ETF and are going to be a direct participant in this market,” he added.
Begging the Need for Active Management
When investing in large-caps, Castellini stressed the importance of active management in the current environment. This is especially true given how much the “Magnificent Seven” stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have overcrowded the sector.
“Investors have had, in a passive format, a free run of letting those winners go, and now have a challenge,” he said. “Forty percent of the Russell 1000 Growth is captured by these names. And that begs the need for active management.”
CastleArk’s investment team has seen “such concentration evolve” in the growth space “over the last five years.” And according to Castellini, “it’s gotten to the point where one slip can affect the index dramatically.”
“We truly believe that the market needs an alternative to indexed large-cap holdings,” he noted. “With the size of the Mag 7, the need to have a conscious, research-driven investment process has never been greater. And our goal is to offer a risk-based alternative to the index.”
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