Laffer Tengler Investments, a Nashville, Tenn.-based RIA, has launched an active ETF that will replicate the strategy used by its Laffer Tengler Equity Income Strategy separately managed account with a focus on fallen angel investments.
The Laffer Tengler Equity Income ETF (TGLR) invests in high-quality, large-cap stocks that have strong earnings and dividend growth potential. Another major investment are fallen angel stocks, which are companies that were once ranked high, but have endured difficult times, which necessitated a drop in ranking.
The firm invests in up to 30 positions and does not include the traditional high yield stocks such as electric companies. It has had success in the past with fallen angel stocks and Tengler does not see a reason to change tactics, said Nancy Tengler, CEO and CIO of Laffer Tengler Investments.
“If you get it right, fallen angel growth stocks are great companies that have stumbled,” she said. “We’re looking at the yield relative to the stock history and to the S&P historically... The reason we use it is because it gives you great indications of what stocks are over and under-valued. These are large-cap companies [and] they have a dividend paying culture.”
It will also use a Relative Price-to-Sales Ratio (RPSR), which sets a buy and sell range one standard deviation away from the mean, Tengler explained.
“When a stock moves into its buy range, then we’ll take a look and decide if we want to own it or not and what dictates that is our proprietary reason models,” she said. “That’s our attempt to avoid what I call terminally cheap stocks and what everyone else calls value traps.”
To determine those stocks, the fund utilizes the firm’s proprietary 12 fundamental-factor research approach, according to Tengler.
TGLR replicates the strategies used by the SMA, which has been active since 2015 and has about $300 million in assets under management. The motivation for launching the fund was to provide the retail market with access to that strategy, Tengler explained. It is an active ETF, which leans into a strategy the firm has implemented in the past.
“We know historically that we've been able to add value above the benchmark and so we had sub advised on a couple of other actively managed ETFs, so it just seemed natural to us,” she said. “It's what we do, and we believe in active management so that was the calculus.”
To help launch and promote the ETF, the firm partnered with Greenwich, Conn.-based Tuttle Capital Management. Matthew Tuttle, chief executive officer and chief investment officer at Tuttle, has years of experience launching and marketing ETFs and said he was interested in TGLR because he thought it was one of the few ETFs available that works as a core fund.
“When I survey the ETF and mutual fund landscape, I don't see a whole heck of a lot that I would classify as a core product that doesn't suck in some way, shape, or form,” he said. “This is something that I can get behind and bring to the retail guys.”
Tuttle, who has a strong social media presence, said he has a lot of interactions with the retail community and will push the product through a variety of his social media channels and in press interviews. He wants to promote the fund’s allocations to advisors.
“I like that it’s a concentrated portfolio because I think where most active managers go wrong is that they’re index huggers,” he said. “They’re basically indexed funds disguised as active management that charge active management fees.”
TGLR has no minimums and has a .95% expense ratio, according to both firms. It is currently trading through the Chicago Board Options Exchange and will also be available on most platforms, according to Tuttle.