Using Free Cash Flow Across International Value and Growth Equity Investing

Global de-dollarization trends and a weakening dollar have renewed interest in international investing. U.S. equities. This applies especially to those that focus heavily on artificial intelligence (AI), may have reached peak valuations. As such, more investors are looking outside U.S. borders for value-oriented opportunities. At the company level, FCF becomes particularly valuable. FCF is a metric that can help investors asses a company’s ability to deploy excess cash, whether through dividends, share buybacks, operational enhancements, or other capital allocation activities that can enhance shareholder value.

Investors can analyze cash flow statements of international equities to screen for opportunities using the FCF metric. However, there’s an easier way. They can garner international equities exposure with an FCF-driven approach using the VictoryShares International Free Cash Flow ETF (IFLO ) or VictoryShares International Free Cash Flow Growth ETF (GRIN ). Each ETF provides diversified exposure to international equities, with different objectives across value and growth investing, respectively.

IFLO and GRIN have distinct index methodologies, but both rely on FCF as the primary financial metric driving security inclusion. IFLO seeks to track the Victory International Free Cash Flow Index (“IFLO Index”) using a rules-based methodology that targets FCF. The IFLO index first selects the largest profitable companies and then screens for the 150 that yield the highest FCF, using both trailing and forward-looking FCF metrics. This means IFLO’s Index combines a company’s trailing 12-month FCF with projected FCF to calculate expected FCF, arguably providing a clearer picture of future cash generation. A growth filter is then applied, leaving the final 100 companies with high FCF as well as strong growth prospects.

GRIN tracks the Victory International Free Cash Flow Growth Index (“GRIN Index”), which targets companies with strong future growth prospects. The GRIN Index analyzes whether a company can sustain FCF gains over time. That said, the overall goal is to target high-growth, large-cap companies with the potential to compound FCF generation over time. Like IFLO’s Index, the GRIN Index incorporates FCF as a forward-looking measure.

IFLO and GRIN can serve as standalone sources of international exposure or work in tandem for more comprehensive exposure. By combining both funds in a portfolio, investors can gain exposure to international equities’ upside, regardless of whether value or growth is the dominant factor in the current market environment.

Additionally, a portfolio with both IFLO and GRIN can provide diversification across these factors while using a flexible, all-weather FCF metric that may be beneficial in both bull and bear markets. Both IFLO and GRIN have net expense ratios of 0.56%. IFLO’s gross expense ratio is 1.05%, while GRIN’s is 1.06%.
Net expense ratios reflect the contractual waiver and/or reimbursement of management fees through October 31, 2026.

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VettaFi LLC (“VettaFi”) is the index provider for GRIN and IFLO, for which it receives an index licensing fee. However GRIN and IFLO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GRIN and IFLO.

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 vcm.com/prospectus. Read it carefully before investing.

All investing involves risk, including the potential loss of principal. The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, or changes in interest or currency rates. The Funds have the same risks as the underlying securities traded on the exchange throughout the day. ETFs may trade at a premium or discount to their net asset value. International investments can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from U.S. investments. Investments concentrated in a single country, a small number of countries or a specific region may be particularly affected by adverse markets, rates, and events, which may occur in those countries and regions and typically exhibit higher volatility. Both Funds are new with a limited operating history. As a result, they do not have a record of performance or other dealings for prospective investors to evaluate when making investment decisions.  Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions. The Funds could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Index Funds invest 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. 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 of cash, may adversely affect other shareholders, including potentially increasing capital gains. Derivatives may not work as intended and may result in losses. The value of your investment is also subject to geopolitical risks such as wars, terrorism, trade disputes, 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. Diversification does not assure a profit or protect against loss.

The Victory International Free Cash Flow Growth Index measures the performance of profitable companies in the developed world, excluding the United States, that generate high free cash flow yield and higher growth characteristics. The indices are subject to sector country and individual security weight constraints. Constituents are weighted by free cash flow modified absolute momentum.

The Victory International Free Cash Flow Index measures the performance of profitable companies in the developed world, excluding the United States, that generate high free cash flow from invested capital and display higher growth characteristics. The indices are subject to sector country and security weight constraints. The constituents are weighted by modified free cash flow yield.

VictoryShares ETFs distributed by Victory Capital Services, Inc. (VCS). VCS is not affiliated with VettaFi.

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