Looking ahead to the new year, WisdomTree Investments has launched a new quality growth ETF to add to its roster, the WisdomTree U.S. Quality Growth Fund (QGRW). QGRW joins a similar strategy already part of the firm’s lineup, the WisdomTree U.S. Dividend Growth Fund (DGRW) which prioritizes dividends instead of quality in assessing growth strategies.
QGRW tracks the WisdomTree U.S. Quality Growth Index, a market-cap-weighted index that ranks its component firms by growth and quality, equally weighted. Including 100 companies, the index determines the growth factor based on a 50% weight for its media analyst earnings growth forecast and 25% each for its trailing 5-year EBITDA growth and trailing 5-year sales growth.
It determines the quality factor meanwhile based on a 50% weight to each firm’s trailing 3-year average return on equity and return on assets. According to the firm, its combination of quality and growth helps it avoid “highly speculative, or junky, growth names,” while not missing firms with explicit growth signals.
“In 2023, when advisors look to reconsider adding some growth exposure to their portfolio as the Fed slows the pace of rate hikes, they will have a new fundamentally focused offering to consider,” said VettaFi’s head of research Todd Rosenbluth. “QGRW joins an already strong suite of quality-focused ETF products.”
The new quality growth ETF is set to charge a 28 basis point fee, as well, the same as its dividend-focused cousin DGRW. QGRW’s index currently holds the likes of Apple, Inc. (AAPL), Microsoft (MSFT), and Amazon (AMZN) in its top five highest-weighted firms according to the ETF’s prospectus. As of launch, the strategy had about $1.3 million in AUM.
WisdomTree may be inspired by its decision to launch QGRW by the flows welcomed by DGRW, which has taken in $120 million in net inflows over the last four weeks. DGRW’s Europe-focused relative, the WisdomTree Europe Quality Dividend Growth Fund (EUDG) has also picked up steam in recent weeks, the firm’s second-best performer over one month returning 5%.
Investors looking at how to position themselves for 2023 have many options when it comes to their growth sleeves. Whichever way they decide to go given the prospect of a looming recession, QGRW may be one to follow moving forward.
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