Legendary value investor Jeremy Grantham is betting on a special caliber of stocks with his company’s first active ETF: the GMO US Quality ETF.
GMO partner Tom Hancock has been put in charge of this.
“There’s a lot more interest in active ETFs than there was a few years ago,” Hancock told CNBC’s “ETF Edge” this week. “Across our clients, a lot of them are really excited about investing in ETFs. Of course, there are tax benefits. But even among our institutional clients, just the ease of trading them is very important.”
Hancock says the new European investment fund is built around companies that can deploy capital sustainably and with high rates of return, with a focus on technology, healthcare and consumer staples.
According to GMO’s website, as of November 17, the ETF’s top holdings include Microsoft, UnitedHealth, and Johnson & Johnson.
“[These companies] They can do things that competitors cannot do. Trenches around their business. “They have strong balance sheets. These are war companies that will remain relevant and important going forward,” he said.
However, the stock’s performance has been mixed so far this year. Microsoft shares are up nearly 54% so far this year. UnitedHealth shares remained roughly flat while Johnson & Johnson shares fell more than 15%.
ETF Shop President Nate Geraci sees active ETFs as a natural evolution in the industry.
“If you think about an active manager trying to generate income after tax alpha, an ETF wrapper helps reduce that hurdle. It provides a better opportunity for outperformance,” Geraci said.
He adds that ETFs can give active managers a better chance at long-term success.
Since its launch on Wednesday, the price of the GMO US Quality ETF has risen less than half a percent.
“Devoted student. Bacon advocate. Beer scholar. Troublemaker. Falls down a lot. Typical coffee enthusiast.”