On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discusses the VictoryShares Small Cap Free Cash Flow ETF (SFLO ) with Chuck Jaffe of Money Life. The pair discusses several topics related to the fund to give investors a deeper understanding of the ETF.
Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!
Yes, this is the ETF of the Week, where we examine trending, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth. He’s the head of research at VettaFi, where he’s helped to develop their suite of tools that’s going to make you a savvier, smarter investor in ETFs. Go to VettaFi.com more information.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The VictoryShares Small Cap Free Cash Flow ETF, SFLO. S-F-L-O.
Chuck Jaffe: SFLO. S-F-L-O. Borrowing from one of my children’s favorite bands, which was S Club 7: “There ain’t no party like an SFLO party.” It’s the VictoryShares Small Cap Free Cash Flow ETF. Why SFLO now?
Todd Rosenbluth: So, let’s get this disclosure out of the way. You and I are recording this on Tuesday, the day before the Fed is meeting and likely cutting interest rates. So, that’s important for us to be able to say in case they don’t do so. We believe that the Fed is going to cut interest rates this week. We believe that that’s going to be a good thing for a small-cap strategy.
Smaller companies can benefit from lower interest rates. Can benefit if the economy indeed strengthens. SFLO is a unique small-cap multifactor ETF. It’s focused on free cash flow, which is a quality metric. It has value characteristics, but this product from VictoryShares also has a growth tilt. So this is a great way to get small-cap exposure in a fundamentally constructive manner.
And we think it’s going to gain increased attention once the Fed begins, or re-begins, its rate-cutting program.
Chuck Jaffe: Yeah. So, part of this is the call on the fund. Part of this is a call on small-caps because, yeah, you bring down interest rates, you are reducing costs for smaller companies. They’re going to benefit. And it’s the small-cap rally we’ve been waiting for. But we’ve been waiting for a small-cap rally for a long time, and it’s eluded us.
So, is it only just on rates? Is this an okay place for somebody, if the small-cap rally doesn’t come with a rate cut, or if rates are not cut, is this a good place where you’d want to be waiting for when it does finally show up?
Todd Rosenbluth: Well, it’s actually been working. SFLO has been working this year in 2025. So this is an ETF that came out at the end of 2023. It had a good year in 2024. It’s had a relatively good year in 2025 versus the Russell 2000, which tends to be a relevant benchmark, and also versus other free cash flow-oriented ETFs.
So there’s an ETF, (CALF ) from Pacer, that’s actually down this year as you and I are recording, and SFLO is up close to 10%. So, this is a fund that’s performing well because of its investment approach, because of its style. And we think it can continue to do even better if rates come down and more investors embrace small-cap investing.
Chuck Jaffe: This is an interesting fund when I look at the history. because you and I talk — sometimes you talk about new funds, sometimes you’re talking about things that are long in the tooth and well-established. This fund came out at the end of 2023, and it was a below-average performer in its peer group in 2024. It is way above average this year.
So how do you judge a track record like that? Because it’s short, and it’s had that stretch where, admittedly, market conditions are a little different in ‘24 than they are in ’25. But you had the one below-average stretch and the one highly above-average stretch. Does any of that ever play in for you when you’re looking at funds?
Todd Rosenbluth: I think you need to look at the environment that it’s in. So, this is a higher-quality, slightly more defensive, more value-oriented small-cap strategy. So, some of the funds that it’s going to be compared against are going to invest in higher-risk companies. The Russell 2000, for example, doesn’t require a company to be profitable.
In fact, many unprofitable companies are in the Russell 2000. So, there’s a lot of junkier companies that you’d find. Whereas SFLO, because of its focus on free cash flow, it’s going to have a higher-quality tilt to the portfolio. So, we think for people who have not had much exposure to small-caps, because the large-caps have outperformed small-caps for a long period of time, this is a good way to get exposure in a bit more defensive manner.
And I think this record in 2025 is certainly one to take a look at. This is still relatively new, but this is an index-based product. In fact, SFLO is replicating a benchmark that my company VettaFi is behind. So there’s a track record from the index standpoint that I think is still credible as well.
Chuck Jaffe: Index-based product means not quite index-like expense ratio. The expense ratio is just under 50 basis points, or one-half of 1%. Reasonable for a fund like this? I mean, when you consider that it is index-like, do you have a level? I’ve never asked you this question of, do you have a level that you feel they can add to the expenses of an index fund and you go, ‘Okay, this is reasonable?’
Todd Rosenbluth: So, yeah, I think this fund, because it’s a smart beta or multifactor approach, you tend to pay a little bit more for such strategies. I think investors have been embracing it. This fund has gained in popularity this year. It’s now up to $350 million in assets under management. So, there are many investors and advisors that are comfortable with that expense ratio.
It’s not as cheap as a market or a traditional small-cap based product. I know that there are some ones that are much cheaper, and there are also funds that are more expensive. This is middle of the road, and I think you should look at the construction of the portfolio, how it’s built, and what’s inside it more than just the fees.
Chuck Jaffe: I always ask you, or almost always ask you, whether or not a fund plays well with others in the space. And again, rules-based approach, active management, et cetera. But this is also, because of the focus on free cash flow, this is a small-cap value fund. So, if somebody has just a broad small-cap fund, yep, this kind of gives that concentration.
But if somebody already has small value covered in their portfolio, are they good enough, or is this different enough that you can have two in the same space?
Todd Rosenbluth: So I think in that case, if you already own small value within your portfolio, first of all, credit to you for doing so, because it tends to be an overlooked part of the investment style box or categorization. But see if this is a better version of it. If it’s an actively managed — or if it’s a mutual fund, it’s probably more expensive.
It may not have performed the same way. Take a closer look, but we think this fund, SFLO, can fit in very nicely into a diversified portfolio because of its quality tilt, because of its value inclination. But still, there’s a forward-looking growth attribute, or forward-looking growth attributes, that are used in the security selection process. That makes this not a traditional financials portfolio that tends to be heavily weighted.
You get more diversification across the various sectors. So, I think that’s appealing — to be able to get exposure to consumer discretionary companies, as well as healthcare companies and industrials, more so than you would get in a traditional small-value strategy.
Chuck Jaffe: It’s SFLO, and there ain’t no party like an SFLO party. The VictoryShares Small Cap Free Cash Flow ETF. It’s the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. We’ll see you again next week.
Todd Rosenbluth: We’ll see you next week, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe. And I’d love it if you would check out my hour-long weekday podcast. You can do it by going to your favorite podcast app, or by dropping in at MoneyLifeShow.com
Now, if you want to get great information for your exchange-traded fund portfolio, look no further than VettaFi.com, where they have all the tools you need to make yourself a better, smarter, savvier investor.
They’re on X at @Vetta_Fi. Todd Rosenbluth, their head of research, is my guest. He’s on as well at @ToddRosenbluth
The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app. And we’ll be back with another ETF for you to consider next week.
Until then, happy investing, everybody.
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
VettaFi LLC (“VettaFi”) is the index provider for SFLO, for which it receives an index licensing fee. However, SFLO 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 SFLO.
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