Like NYVTX, Amazon.com (AMZN), Berkshire Hathaway (BRK.B), Google (GOOG) and United Technologies (UTX) are among DUSA’s largest holdings, though the weightings are higher in DUSA. But unlike passive smart beta or market cap weighted ETFs, positions can and do get reduced in DUSA for valuation and/or fundamental reasons without a set reconstitution date. For example, according to Davis, the weighting in UnitedHealth Group (UNH) was cut in half between in July due to its valuation.
Clearbridge’s mutual funds have had success in recent years. For example, Clearbridge Large Cap Growth Fund (SBLGX) has more than doubled since the end of 2014 to $1.6 billion, despite the same industry pressures impacting NYVTX. SBLGX also notably outperformed its Lipper peer group in 2015 and 2016. Yet in May 2017, the asset manager launched Clearbridge Large Cap Growth ESG ETF (LRGE). Similar to SBLGX, the ETF is co-managed by Peter Bourbeau and Margaret Vitrano, but for the ETF the duo is joined by Mary Jane McQuillen, who heads Environmental Social and Governance Investment for Clearbridge.
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LRGE is also a high conviction portfolio, combining traditional analysis of large-cap growth companies with sustainable growth and competitive advantages, along with a focus on best practices for environmental, social issues and corporate governance. AMZN and UNH are big positions for LRGE, as are Celgene (CELG) and Red Hat (RHT). Meanwhile, LRGE is the rare large-cap growth ETF without Apple (AAPL) as a top position.
While the asset bases of DUSA and LRGE are much smaller than their mutual fund cousins as investors have focused primarily on passive equity ETFs, CFRA thinks the stocks inside are appealing. For investors that want the benefits of active US equity management, but in an ETF wrapper, these ETFs are worthy of additional attention. While some asset managers are aiming to offer non-transparent active products, CFRA expects Vanguard to soon receive approval to offer transparent active equity ETFs, helping draw investor attention to the Clearbridge and Davis strategies.
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.