On Wednesday, Coastal Equity Management released its first ETF, the Coastal Compass 100 ETF (ROPE ). ROPE aims to provide large cap upside with the added benefit of dividends and downside security.
ROPE is an actively managed fund that seeks to provide total return for its investors. The fund’s net expense ratio sits at 0.80%.
Primarily, ROPE focuses its investments on large-cap stocks. However, the fund may opt to pivot to cash strategies based on the market environment.
Chasing Dividends
To provide the best upside potential for the fund, ROPE’s portfolio team uses a trend following strategy. The fund team starts by looking at the 100 largest equities listed on a U.S. exchange.
From there, ROPE will screen these companies to find those that either have a good history of paying dividends, or great potential for magnifying dividends down the line. Generally, the fund will pick somewhere between 25 to 50 different companies for inclusion.
All in all, ROPE’s portfolio is built full of stocks that not only offer dividends, but also long-term growth potential. As such, the fund can offer a one-two punch for high quality companies and dividends alike.
Benefits of Risk Management & Downside Security
This large-cap strategy is paired with strong downside protection. Should there be a significant market correction or other type of risk factor, ROPE can pivot its portfolio to cash. Depending on the severity of the market downside, ROPE may even allocate up to 100% of its portfolio in cash or cash alternatives.
Given the somewhat uncertain macro environment for 2025, a strategy like ROPE can make a great deal of sense. The fund can access strong upside from mega and large cap equities, along with the potential for dividends. Crucially, if any market corrections or long-term risk factors play out, ROPE can switch to cash exposure to protect investors from downside.
“Disciplined risk management is the key to increasing the likelihood of potential positive outcomes,” adds Scott McCaghren, Co-Founder of Coastal Equity Management. “In other words, offense wins games, but defense wins championships.”
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