The Invesco S&P 500 GARP ETF (SPGP) has been in the limelight in the past year, already attracting over half a billion in flows in 2023.
SPGP has seen $629 million in net flows year to date as of January 21. SPGP saw a jump in research and flows last year as investors searched for a fund offering both growth and value characteristics. While many funds prioritizing quality and value have underperformed over a longer period, SPGP has maintained notable outperformance over the S&P 500 in various market environments.
The fund, which has $2.7 billion in assets under management, saw $1.2 billion in net flows last year. This was a dramatic pivot from 2021 when the fund saw $442 million in inflows, and 2020 when the fund saw $173 million in outflows.
“[SPGP] has been very topical as a lot of advisors have been looking to maintain their growth exposure, but kind of do it in a way where they are less worried about valuation,” Nick Kalivas, head of factor and core equity product strategy for Invesco, told VettaFi.
Kalivas said he thinks allocating to a GARP ETF will be a secular trend. Going into 2022 and the rising rate economic environment, many investors were buying growth at any price as there was a reward for taking on a lot of risks and growthy names.
“I think last year was kind of a realization that these growth stocks may be great — and you certainly see it with Microsoft today with their AI chat/search that they came out with — but it’s raised this idea that price does matter,” Kalivas said.
“A lot of investors are going to be thinking more about GARP-like strategies when they’re looking for growth but they want to have some guardrails on it, and so I think that this is something we’re probably going to see continue,” Kalivas added.
Looking at performance, GARP does well when growth is in favor, but it also keeps up well when value is in style. The fund has a strong track record of outperforming the S&P 500 and introduces factor tilts to a portfolio.
SPGP tilts toward both the growth and value factors, which is highly unusual to see in an ETF. SPGP also has some quality characteristics, and since it weights securities by growth instead of market cap, it tends to be smaller down the market spectrum in terms of where performance is generated, introducing the small size factor.
“Those are really, I think, very attractive factors from a multi-factor perspective and I think that’s going to translate to GARP being added to a lot more portfolios from a kind of a strategic allocation,” Kalivas said.
SPGP has increased 5.24 % year to date as of February 21, outperforming the S&P 500 by 88 basis points, each on a total return basis. In 2022, SPGP lost -13.83% while the S&P 500 declined -18.11%.
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