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GMO U.S. Quality ETF in Registration

2

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  • edited November 2023
    @yogibearbull,

    Thank you for checking. That is transparent.

    M* shows portfolio turnover for GQETX - 15%; JQUA - 18%; QUAL - 58%. The as of dates are different and as you all know because of how M* calculates turnover, fund flows can impact the turnover percentage. When I look at outflows, they are very small for all three funds. @rsorden can perhaps clue us in about the actual portfolio turnover for GQETX.

    Folks might complain even more about the ER if the turnover is truly so low but I guess GMO can not undercut its own mutual fund with a lower ER for the ETF, though the products are not identical. I checked a few active ETFs I know and their ER varies from 0.3% (TRP) to 0.6% (Fidelity). JPM is in between.

    I only talked about ER in my earlier post only as one of the measures of the fund's appeal for investors (e.g., liquidity) because a lot of investors are sensitive to ER, which M* and Vanguard have drilled into investors' psyche. Per M*, MOAT ER is 0.46%.

    To me the 0.5% ER is acceptable if the fund outperforms the indexed quality ETFs and I hope (for my sake) that is acceptable to other investors as well.
  • May be one of you guys can post when M* recognizes the ticker, QLTY. I am not able to track it in my M* portfolio.
  • @BaluBalu GMO rebalances the portfolio monthly, so the 15% on M* seems low...it's more like ~50% from our view.
  • edited November 2023
    BaluBalu said:

    May be one of you guys can post when M* recognizes the ticker, QLTY. I am not able to track it in my M* portfolio.

    M* Quotes [and M* Portfolio (old), but not M* Investor (new)] do recognize it now but there are lots of blanks, https://www.morningstar.com/etfs/arcx/qlty/quote

  • edited November 2023
    rsorden said:

    @BaluBalu GMO rebalances the portfolio monthly, so the 15% on M* seems low...it's more like ~50% from our view.

    Appreciate your responses to my questions. Do you by any chance know the monthly rebalance dates / schedule? My interest is more not to sell right before rebalancing if I ever get an urge to sell. Obviously, I am hoping this to be a buy and hold but like to think about exit strategy before I need to exit.

    Thanks Yogi re M* port

  • The GMO launch announcement. One notes that they use "GMO ETFs" in the plural.
  • Heavy trading volume with lower volatility (tighter low - high price) today.
  • edited November 2023
    A brief story on QLTY and active etf's at CNBC that is not behind a paywall.
    According to GMO’s website, as of November 17th, the ETF’s top holdings include Microsoft, UnitedHealth and Johnson & Johnson

    ″[These companies] can do things competitors can’t. Moats around their business. They have strong balance sheets,” he said. “These are battleship companies that are going to remain relevant and important going forward.”

    Yet, the stocks’ performance is mixed so far this year. Microsoft is up almost 54% so far this year. Shares of UnitedHealth are virtually flat while Johnson & Johnson is down more than 15%.
    Random thoughts generated:

    Anybody that looks at M* could understandably feel moated out.

    However, MOAT doesn't actually own any of those three in its top ten. Surprised me.

    And this from the same article:
    ETF Store President Nate Geraci sees active ETFs as natural evolution in the industry.

    “If you think of an active manager attempting to generate after tax alpha, the ETF wrapper helps lower that hurdle. It offers a better chance at outperformance,” Geraci said.

    He adds ETFs can give active managers a better chance at long-term success.
    Random question springs to mind:

    Has buying the cap-weighted market lost it's luster? Since January 2000 the CAGR for VFINX has been 6.37, if I have set this up correctly.

    I know I haven't done better than that, but I like cash. OTOH, it's paying off now since we aren't liquidating assets to finance our lifestyle in retirement.

    DODGX, for one, has done better, with a CAGR of 8.93%. And they only charge a penny more than QLTY.

    VFINX did win the fin de siecle of the 20th century. It was a lot easier to make money in the market in those days.

    YMMV

    BTW,my amateur interest in naval history prompts me to add that battleships have not been relevant for a very long time.
  • @WABAC: the “wide-moat” approach taken by the Van Eck MOAT considers other factors besides the existence of a narrow or a wide moat. In addition to deciding if a firm has a moat, M* establishes a fair value for the stock, expressed in stars 1 to 5, and tries to determine how far above or below that value the stock is trading. From my understanding, the fund selects 4 and 5-star for inclusion in the fund, runs some sort of screen to determine the financial strength of the company, and then, quarterly, reviews 40 of the 80 fund holdings for continued inclusion or for exclusion. A stock might be dropped for “valuation” meaning it rose enough in price to no longer be an attractive holding or it could be dropped if some material change took place. It’s also possible that more attractive candidates replace existing holdings. When MOAT came to market it had but 40 stocks, all up for review quarterly, and at one point the fund became massively overweight energy due to the PMs slavishly following the original rules. Performance suffered badly. Doubling the size of the fund and rebalancing only half of the portfolio quarterly seems to have fixed those early glitches. So, a company may have a wide moat, but it won’t become part of the fund unless it’s a “good” buy. I like my long-term mileage.
  • edited November 2023
    Not suggesting we are in a stock market mania, but in a mania market, expect MOAT to underperform. When MOAT changed its methodology in 2016, they made a small fix to it traditionally disregarding the Momentum factor but not a large enough fix.

    MOAT methodology is agnostic to Quality factor as well. (It is possible, in M* eyes, moat subsumes quality.) So, If one looks at M*'s factor profile for MOAT, Momentum and Quality factors currently rank the lowest of all the factors.

    Also, I would not invest in MOAT unless one is interested in Value because valuation (though can be subjective / assumptions) drives its strategy. If one looks at the M* style map, this can be seen easily.

    Currently, its size factor is on the border of large and mid cap. Also, it is somewhat equal weighted (vs cap weighted). Mid cap and equal weighted portfolios have not done well lately vs SPY. Even after the 2016 methodology changes, the fund can swing greatly in factors (except the Value factor) from one rebalance date to the next, and if one is inclined to be in-charge of active management of their portfolio (or the portion allocated to MOAT), MOAT is not for you, as it can throw you off your game.

    With MOAT, expect to get idiosyncratic experience relative to SPY.

    Next rebalance is after the third Friday in December. So, its portfolio is fixed until then - just in case, one is hoping and praying that it will behave differently tomorrow.

    Hopefully, that is enough discussion about MOAT and the thread can get back to QLTY.
  • edited November 2023
    Back to the subject of the Thread.

    QLTY trading volume continues to be odd. Everyday since its launch, the volume is higher than the previous day but the AUM remains the same $3.1M (as of today's market open). Today's volume is large enough that almost 100% of the # of outstanding shares would change hands in just today. So much retail (and FA) interest (fascination) with this ETF but not enough institutional interest to get the AUM move above the meager launch AUM!
  • @BenWP, thanks for the education about MOAT. Mainly I'm just amused at the terms people use. After all, it was the manager of QLTY that described the stocks in his portfolio as battleships with MOATS. I was wondering if he had to pay M* for using the term.

    Shortly after my morning post, MSNBC had an article about choiceful being a new term of art in end-of-year roundups from consumer-oriented companies mainly. Perhaps QLTY has choicefully sized some of those companies into their fleet.

    As for quality, that word gets a lot of use too.

    I follow QLTY with interest. As with TCAF, I am looking forward to doing a portfolio comparison to see how they overlap with other funds.
  • @Balubalu yes I have also been following the volume in QLTY with great interest… as of today the average volume is about 85K… I think the AUM must be larger than $3M… perhaps they haven’t yet updated the AUM.
  • edited November 2023
    MikeW said:

    @Balubalu yes I have also been following the volume in QLTY with great interest… as of today the average volume is about 85K… I think the AUM must be larger than $3M… perhaps they haven’t yet updated the AUM.

    Not updating is not a choice. They are required.

  • QLTY AUM is missing at most sites (M*, Yahoo Finance, Nasdaq, Fido), including at GMO. But I downloaded its holdings as of 11/22/23 from GMO site, added up the market values of all holdings, and that is $8.01 million. May be this is what they mean by "daily disclosure".
  • edited November 2023

    QLTY AUM is missing at most sites (M*, Yahoo Finance, Nasdaq, Fido), including at GMO. But I downloaded its holdings as of 11/22/23 from GMO site, added up the market values of all holdings, and that is $8.01 million. May be this is what they mean by "daily disclosure".

    That is how I have been calculating & reporting the AUM.

    That means it received about $5M net inflows on 11/21 (minus change in price which I think was very small). Some progress but am still stumped by the lukewarm institutional enthusiasm, given how much GMO brand is in the press and their mutual funds’ high minimums.

  • Trading volume coming down, though still very high for its AUM size, which was $11.1M as of Friday close.
  • Professor Snowball wrote a good article about QLTY in the December MFO issue.
    https://www.mutualfundobserver.com/2023/12/launch-alert-gmo-us-quality-equity-etf/
  • edited December 2023
    Bloomberg article (via MSN) discusses this OEF/ETF....

    GMO’s $8 Billion Fund Beats S&P 500 Even Without Nvidia, Tesla
  • edited December 2023
    @davfor, thanks for the link. Good to see that the top 10 holdings are not dominated by the magnificent seven stocks. Professor Snowball’s article, particularly the table of GMO mutual fund ( not this ETF) is very compelling when compared to other ‘quality’ OEF and ETFs.
  • The GMO process seems better than another MFO Favorite, BIAWX, which is more heavily into Tech and NVDA, for example. While it has beaten the GMO fund during times of tech out performance, it is more volatile
  • QLTY is up to $20M (rounded) in AUM. Trading volume coming down materially (about 1/3 of the average) but probably still high for a $20M fund.
  • contrary opinion. if I had to pick this or voo and hold for next ten years I would pick voo. qlty is a high cost index fund. over 15 years the spy beat it.
  • edited December 2023

    contrary opinion. if I had to pick this or voo and hold for next ten years I would pick voo. qlty is a high cost index fund. over 15 years the spy beat it.

    QLTY is a month old fund and is an actively managed (not an index) fund. Not sure where you are getting your 15 year numbers and calling QLTY an index fund from.

    GQETX a cousin of QLTY (a US equity fund) and is allocated 20% to International stocks. To give you the benefit of doubt, I compared GQETX with SPY (same as VOO) and its total return is slightly higher than that of SPY (let us call it even) over a past 15 years. However, over the life of GQETX and over the last 10 year period, GQETX handily beat SPY. GQETX is also less volatile.

    As an opinion, one can pick VOO over QLTY for a future investment. Yes, one can have an opinion (contrary or concurring) about the future but it is not possible to have contrary (or alternate) facts about the past.

    What is the purpose of the drive by shooting?
  • For anyone interested. GMO US Quality fund I GQLIX is available at Firstrade for $100 minimum. The info is available within ones account.
  • fundly said:

    For anyone interested. GMO US Quality fund I GQLIX is available at Firstrade for $100 minimum. The info is available within ones account.

    GQLIX is a different class of GQETX and as such GQLIX is not just a US Quality fund. BTW, you are not alone in thinking that it is a US equity fund.

    Good information about the availability at FirstTrade.
  • @Balu. Yup I mucked it up in my haste to post the info. It is the GMO Quality I fund with about 20% international equity. Thanks!
  • the manager has a 15 year track record with another fund. the index did better. the reason I say I would rather own the index is because of the massive overlap in holding this fund has with the index. I am simply betting on lower costs. Also I understand the intense desire to find the manager with the secret sauce. I fell for it with SEQUX. They haven't beat the index in last 5 10 or 15 years.

    It's weird that expressing an opinion on something, I warned you it would ruffle feathers, is now considered a "drive by".
    BaluBalu said:

    contrary opinion. if I had to pick this or voo and hold for next ten years I would pick voo. qlty is a high cost index fund. over 15 years the spy beat it.

    QLTY is a month old fund and is an actively managed (not an index) fund. Not sure where you are getting your 15 year numbers and calling QLTY an index fund from.

    GQETX a cousin of QLTY (a US equity fund) and is allocated 20% to International stocks. To give you the benefit of doubt, I compared GQETX with SPY (same as VOO) and its total return is slightly higher than that of SPY (let us call it even) over a past 15 years. However, over the life of GQETX and over the last 10 year period, GQETX handily beat SPY. GQETX is also less volatile.

    As an opinion, one can pick VOO over QLTY for a future investment. Yes, one can have an opinion (contrary or concurring) about the future but it is not possible to have contrary (or alternate) facts about the past.

    What is the purpose of the drive by shooting?
    BaluBalu said:

    contrary opinion. if I had to pick this or voo and hold for next ten years I would pick voo. qlty is a high cost index fund. over 15 years the spy beat it.

    QLTY is a month old fund and is an actively managed (not an index) fund. Not sure where you are getting your 15 year numbers and calling QLTY an index fund from.

    GQETX a cousin of QLTY (a US equity fund) and is allocated 20% to International stocks. To give you the benefit of doubt, I compared GQETX with SPY (same as VOO) and its total return is slightly higher than that of SPY (let us call it even) over a past 15 years. However, over the life of GQETX and over the last 10 year period, GQETX handily beat SPY. GQETX is also less volatile.

    As an opinion, one can pick VOO over QLTY for a future investment. Yes, one can have an opinion (contrary or concurring) about the future but it is not possible to have contrary (or alternate) facts about the past.

    What is the purpose of the drive by shooting?
  • Perhaps if you had made it clear that you were referencing "another fund" your comments would have been appreciated.
  • @operation_twist,

    I looked up M* total returns for GQETX and SPY from 12/12/2008 to 12/12/2023 and also from 12/12/2008 to 12/13/2023 - your post was on 12/13/2023. In both cases, GQETX total returns were higher than that of SPY, as I had already said in my previous post. I did extra work trying to understand where you may be coming from and posted my work. You on the other hand do not seem to have any intention of seeing the facts, except repeating your claims.

    Repeating a false claim with even a bigger post does not make the false claim correct in this forum. Everyone makes an occasional mistake but when the mistake is owned, the forum resources are spent on mutually productive endeavors.

    In addition, that 15 year period is when international stocks did worse than US stocks and I already mentioned in my previous post that GQETX has 20% in international stocks. Why would anyone compare SPY total returns to GQETX, even though GQETX did better, to express a firm opinion about the manager? BTW, M* also shows GQETX has 68.64% active share - to your statement that QLTY is a [high cost] index fund.

    If you simply stopped at "[I]f I had to pick this or voo and hold for next ten years I would pick voo", I would have no problem and I would not even ask you to justify, especially when Warren Buffet said the retail investor should put all their equity investment in SPY.

    It is your next statements, "qlty is a high cost index fund. over 15 years the spy beat it" that are factually inaccurate.

    No one here is married to this manager or to GMO. I will go to whoever will pay me more. It is each person (or investor)'s responsibility to get out of unproductive relationship(s).

    Unfortunately, this forum does not have an ignore button. If it did, I would request you to put me on Ignore and I would also reciprocate.
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