Advisors and investors wanting to keep their equity portfolios dynamic with a forward-looking approach should consider the VictoryShares Free Cash Flow ETF (VFLO ). VFLO’s approach to free cash flow (FCF) yield offers an innovative option to purely historical-based strategies.
Investors often look to a company’s FCF when measuring its financial health and quality. FCF is the cash left after a company has covered its expenses. It’s used in various ways, from paying dividends to investing in growing the business or even paying down debt.
A Forward-Looking Approach to Free Cash Flow Investing
Many available strategies today measure FCF using trailing 12-month data, thereby capturing only half of the financial picture. VictoryShares seeks to offer a more holistic approach to FCF investing through its use of both trailing 12-month FCF measurements and forward 12-month FCF estimates. By combining these two measurements, VictoryShares seeks to ascertain a company’s expected FCF, providing a forward-looking approach to FCF investing.
This expected FCF is then divided by a company’s enterprise value to calculate FCF yield. Enterprise value measures a company’s market cap minus its debts. Including debts ensures the strategy captures quality companies in stable financial health.
VFLO invests in quality companies with high FCF yield and tracks the Victory U.S. Large Cap Free Cash Flow Index (the Index). When screening companies, VFLO’s rules-based methodology calculates FCF holistically by including both trailing and expected FCF. The Index also applies a growth filter intended to eliminate companies with high FCF but with weak growth prospects.
The methodology limits the sector and individual weights of securities. Companies within an individual sector may not exceed 45% of the Index and single securities may not exceed 4% weight within the Index. Furthermore, individual sectors do not exceed 20% of the sector weight of the starting universe.
VFLO carries a net expense ratio of 0.39% and a gross expense ratio of 0.48%.
Net expense ratios reflect the contractual waiver and/or reimbursement of management fees through October 31, 2025.
For more news, information, and analysis, visit the Free Cash Flow Channel
VettaFi LLC (“VettaFi”) is the index provider for VFLO, for which it receives an index licensing fee. However, VFLO is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VFLO.
Disclosure Information
Carefully consider a fund’s investment objectives, risks, charges, and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit http://www.vcm.com/prospectus. Read it carefully before investing.
All investing involves risk, including the potential loss of principal. Please note that the Fund is a new ETF with a limited history. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. Redemptions are limited, and commissions are often charged on each trade. ETFs may trade at a premium or discount to their net asset value. The Fund invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions.
The Fund could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Derivatives may not work as intended and may result in losses. Large shareholders, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of large shareholders, including large inflows or outflows, may adversely affect other shareholders, including potentially increasing capital gains. The value of your investment is also subject to geopolitical risks such as wars, terrorism, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies.
Additional Information
The Victory U.S. Large Cap Free Cash Flow Index aims to select high quality companies from its starting universe by applying profitability screens. It then selects companies with the strongest free cash flow yield that exhibit higher growth. The Index is rebalanced and reconstituted quarterly. This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month FCF and next 12-month forward free cash flow. Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization.
Distributed by Foreside Fund Services, LLC (Foreside). Foreside is not affiliated with Victory Capital Management Inc. (VCM), the Fund’s advisor. Neither Foreside nor VCM are affiliated with VettaFi.
