Entrepreneurs who break the mold are creating quickly growing companies that investors can gain exposure to through a targeted ETF strategy focusing on these up-and-coming firms.
Specifically, investors can look to EntrepreneurShares’ Entrepreneur 30 Fund (NYSEArca: ENTR).
“We have our own unique, proprietary factors,” Joel Shulman, Founder & CEO of ERShares, said at Inside ETFs 2019.
“What we do is we invest in publicly traded entrepreneurial companies and so we cobbled together 15 different variables…. Mostly governance and the people who run the organization – true entrepreneurs, and they create alpha over on a risk-adjusted basis over a long period of time,” he added.
The Entrepreneur 30 Fund tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards.
The factors screened include management, which requires set factors regarding a company’s management must be met for a company to be included, such as the turnover among the top five executives within a company as compared to other companies in the broader universe must be met.
The compensation screen requires set factors such as annual compensation, salary, bonus, stock options and other compensation criteria be met for a company to be included, including, among other things, that the executive compensation among the top five executives of a company relative to comparable executives in similar companies in the broader universe must be met for the company to be included.
The revenue screen requires a company meet predetermined criteria regarding revenue over a static threshold to be included, including, among other things, the amount and growth of revenue of a company as compared to predetermined benchmarks must be met.
The ownership factor requires a company meet predetermined criteria regarding ownership among all key investors and stakeholders to be included, such as the absolute and relative ownership levels of the top ten stakeholders of a company as compared to predetermined benchmarks.
The profitability screen requires a company meet predetermined criteria regarding net income over a static threshold to be included, including the net income of a company as compared to predetermined benchmarks must be met for the company to be included.
Lastly, company statistics refers to a company meeting predetermined criteria regarding the corporate structure, and other company statistics, to be included, such as a company must have certain set characteristics within its corporate structure as compared to other companies.
More recently, EntrepreneurShares came out with the ERShares Non-US Small Cap ETF (ERSX), which tracks 50 non-U.S. companies from around the world with market capitalizations between $300 million and $5 billion USD and have the highest rank based on the six investment style factors.
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