Timothy Plan launched three exchange-traded funds (ETFs) today, effectively merging the worlds of values-based and fundamental investing. In partnership with sub-advisor Victory Capital, the pioneer of Biblically Responsible Investing (BRI) expanded its suite with the Timothy Plan Free Cash Flow ETF (TPFC) and the Timothy Plan Free Cash Flow Growth ETF (TPFG). Additionally, they launched the actively managed Timothy Plan Fixed Income ETF (TPFI).
TPFC and TPFG utilize free cash flow (FCF). This is a way to assesses the health of a company by distilling it down to a single metric. The general calculation involves subtracting operating and capital expenditures (CapEx) from operating cash flow. However, the way it’s applied can vary depending on the ETF issuer. Victory Capital is a pioneer in applying FCF methodologies across its VictoryShares brand. Consequently, Timothy Plan’s partnership with Victory Capital represents an ideal collaboration.
See more: Why Free Cash Flow Should Be Front of Mind in Today’s Market
FCF Screeners & Active Fixed Income
As opposed to market-cap-weighted indexes, TPFC and TPFG use a rules-based framework that identifies companies with a surplus of FCF. This excess cash can be used to reinvest in operations, buy back shares, distribute dividends, or other activities that create shareholder value.
Both funds use this proprietary free cash flow screening mechanism modeled after successful quantitative strategies employed by Victory Capital. As mentioned, the methodology is closely aligned with prominent VictoryShares ETFs like the VictoryShares Free Cash Flow ETF (VFLO ). The fund’s $6.7 billion in assets under management (as of May 5) speaks to the success of its strategy.
The prime differentiator with TPFC and TPFG, of course, is the addition of a BRI screener that aligns with Timothy Plan’s biblically based investing mandate. This overlay automatically eliminates businesses engaged in activities contradictory to traditional Christian values, including abortion, pornography, gambling, and human rights violations.
The two new ETFs serve distinct portfolio roles:
- TPFC: Tracks the Victory Free Cash Flow BRI Index, which identifies high-quality, FCF-rich firms across various sectors. The fund’s expense ratio is 59 basis points.
- TPFG: Tracks the Victory Free Cash Flow Growth BRI Index, which applies a forward-looking growth screener on top of the FCF screener to capture companies with strong growth prospects. Likewise, the expense ratio for this fund is 59 basis points.
The Actively Managed Anchor
In the case of TPFI, active management has seen record launches in the past year so it’s entry into the market comes at an ideal time. The timing is even more auspicious given the current demand for fixed income strategies amid heightened volatility and higher-for-longer rates. Using its BRI screener, TPFI’s active approach emphasizes income through a dynamic mix of U.S. government, corporate, and mortgage-backed bonds. In addition, a focus on mitigating interest rate and credit risk makes TPFI a compelling option for investors seeking a defensive anchor as a portfolio ballast along with income. TPFI’s expense ratio comes in at 55 basis points.
Differentiated Stewardship
With over $3 billion in assets as of April 7, Timothy Plan has been a pioneer in the fund industry by applying their biblically based investment screener. This differentiated stewardship underscores the firm’s objective of providing products that not only produce a financial return, but also align with specific investors’ values and beliefs.
“Investors are increasingly questioning what they actually own, not just how it performs,” said Brian Mumbert, president of the Timothy Plan Trust and chief operating officer of Timothy Partners, Ltd. “These ETFs offer a cost-efficient approach for investors seeking to align their investments with their values.”
VettaFi LLC (“VettaFi”) is the index calculation agent for TPFC, TPFG, and VFLO, for which it receives a fee. However, TPFC and TPFG are 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 TPFC, TPFG and VFLO.
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