GMO, a Boston-based global asset management firm, has undertaken its first foray into the ETF market with the GMO U.S. Quality ETF (QLTY).
The firm has traditionally served institutions and other high-end clients, many of whom have taken a greater interest in the tax benefits of ETFs, said Tom Hancock, head of focused equity at GMO and portfolio manager of QLTY.
“Increasingly the definition of an institution includes very high-net-worth individuals, family offices, [and] we have more of a presence in the RIA market,” he said. “We have a bigger base of tax-aware investors [and] that big advantage has led people to ask us about ETFs.”
QLTY invests in high-quality stocks with the benefits of the ETF wrapper, including tax efficiency, daily transparency, and continuous liquidity, he said.
“Our philosophy is buy high-quality companies, but also be sensitive to the valuation and not overpay for what could be great business and lousy stock if the price is too high,” Hancock said.
The fund will look for companies with high returns on capital, strong balance sheets, and opportunities to build and grow, according to Hancock.
“We’ve always believed that great companies should trade at a premium and we have an intrinsic value style where we try to identify great companies and be willing to pay a reasonable premium for them,” he said.
The ETF brings together both quantitative and fundamental investing, Hancock said. In addition, it includes both higher growth companies such as in tech, and defensive companies, like those in consumer staples.
“Having both of these in the portfolio is good from a diversification point of view, but it also gives you good rebalancing opportunities,” Hancock said.
The management fee for the fund is 50 basis points and it is available on most platforms, GMO said.