Investment flows continued into the quality-focused VictoryShares Free Cash Flow ETF (VFLO ) as of the end of September 2024. The ETF’s third quarter rebalance reapplied its index methodology to reconstitute holdings, which in this quarter, resulted in increased profitability.
VFLO provides exposure to quality companies with high free cash flow yield currently trading at a discount and seeks to track the Victory U.S. Large Cap Free Cash Flow Index (the Index). Free cash flow (FCF) is the remaining cash a company has after covering all expenses. Companies may use it to invest in growing their business, pay dividends, or pay down debt. FCF is one method of measuring a company’s financial health.
Q3 Rebalance Dials Up Profitability
VFLO continues to capture the attention of investors, crossing $1 billion in AUM as of the first week in October (10/3/2024). The most recent rebalance may leave it attractively positioned moving into the fourth quarter and beyond.
The third quarter rebalance led to the portfolio shedding three securities, dropping from 53 holdings to 50. At the same time, the rebalance led to a higher return on equity (ROE). This measurement is used to gauge how well a company uses the cash invested in it to grow earnings. By dividing the net income by shareholders’ equity, investors can better understand the profitability of a company as well as its efficiency. The overall portfolio’s trailing 12-month ROE grew from 23.1% before rebalance to 26.2% post-rebalance, following the third week of September 2024.
Notably, the portfolio enhanced its current profitability exposures as well as potential future profitability. With the September rebalance, VFLO’s estimated three- to five-year earnings per share (EPS) growth rose from 7.8% to 10.7%. EPS growth measures the rate at which a company grows its profitability, while forward-looking estimates reflect analyst expectations for growth.
VFLO carries a net expense ratio of 0.39% (gross expense ratio of 0.48%).
Net expense ratios reflect the contractual waiver and or reimbursement of management fees through at least 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 concerning 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.
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 ETF 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 ETF could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Investments concentrated in an industry or group of industries may face more risks and exhibit higher volatility than investments that are more broadly diversified over industries or sectors. Derivatives may not work as intended and may result in losses.
Additional Information
If a seed investor redeems its shares, it could negatively impact the Funds’ NAV, market price and brokerage costs. The ETF 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 ETF invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits.
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.
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.
VictoryShares ETFs distributed by Victory Capital Services, Inc. (VCS). VCS is not affiliated with VettaFi.
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