As a former mutual fund analyst, there are some asset management brands I remember. Tweedy, Browne is one of them. They offered actively managed, long-term-minded, value strategies that always seem to appear on my radar. While I was on vacation in late December 2024, the firm launched its first ETF. The Tweedy, Browne Insider+Value ETF (COPY ) began trading on December 27 — in time for the active ETF to start the new year with a track record.
I connected with Jason Minard, managing director and head of client services at Tweedy, Browne. Below, we talk about why Tweedy, Browne entered the ETF market and the approach of COPY.
VettaFi: After a long history as a provider of mutual funds, why did Tweedy, Browne enter the ETF market at the end of 2024?
Minard: We have always worked hard to try to generate attractive pretax and after-tax returns for our tax-paying clients across all of our product lines. Chris Browne, a deceased former partner at Tweedy, used to refer to April 15, jokingly, as a national day of mourning. To that end, we have been studying the tax advantages of the ETF structure for quite some time. It took us a while to get up the learning curve. But after careful and thorough study, we launched the Tweedy, Browne Insider+Value ETF.
We believe our newly launched ETF is especially suited to the ETF tax advantaged structure. It is an actively managed strategy. The average holding period for a stock being six months to three years.
While our mutual funds remain a critically important component of our product offerings, we view our entry into the ETF space as a natural extension of our business, affording tax-paying investors access to our actively managed strategies within a tax-efficient ETF structure.
VettaFi: You are known for actively managed value strategies. Can you tell us about the approach of the new ETF?
Minard: As I think you know, Tweedy, Browne has for over 100 years been a leading practitioner of the investment approach first pioneered by the legendary investor, author, and Columbia Business School Professor Benjamin Graham. Our new Insider+Value ETF offers investors an innovative twist on Graham’s approach. It utilizes a largely quantitative, factor-driven investment approach combining insider purchase data and value-oriented metrics across multiple geographies and market capitalizations.
The approach seeks to take advantage of what we often refer to as the “insider’s edge.” That’s the unique insight that high-ranking corporate executives and informed directors can have regarding the prospect for improvement of their company’s condition and share price. Empirical studies, including our own, have identified a return advantage associated with following the purchase behavior of corporate insiders, especially when their company shares appear to be undervalued at the time of purchase.
In addition, to our way of thinking, copying the behavior of knowledgeable corporate insiders, i.e., those in the know when it comes to their company’s prospects, seems quite sensible and logical. Ultimately, there is only one rational reason for corporate insiders to reach into their wallets and make free-will, open-market purchases of their companies’ shares: They believe the stock price will increase. They do not buy their stock with the intention of losing money. However, many insider purchases have resulted in future losses, not gains. There is no “sure thing” in investing.
VettaFi: What are the benefits of incorporating insider buying in addition to valuation as a selection criteria?
Minard: We are hopeful that the combination of insider buying with undervaluation translates into better investment returns for investors. At least that is what empirical studies, including our own, would suggest.
In our view, material, free-will purchases by knowledgeable corporate insiders — or by the company itself, when their company’s shares appear to be undervalued — could be a signal that the company shares are indeed mispriced by the market. C-suite executives often have insights concerning new marketing programs, improving industry conditions, undervalued assets held by the company, and the value of the company’s shares if it were to be acquired by a competitor or private equity firm. C-suite executives have access to investment bankers who may be very familiar with acquisition valuations and standards in their company’s industry.
Most importantly, C-suite executives can act. They can initiate corporate actions that may lead to an increase in their company’s stock price, such as initiating dividend increases, buybacks of shares at depressed prices, debt paydowns, spinoffs, and sales of assets whose value is not reflected in the company stock price, cost-cutting programs, business expansion programs, and even the sale of their company to a competitor or a private equity firm.
The C-suite insiders can create news. They are the source of the information that Wall Street investment analysts, institutional investors, hedge funds, individual investors, and corporate and private equity acquirers rely upon in making investment decisions.
VettaFi: Welcome to the ETF market. Demand remains strong but education remains paramount.
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