Kansas-based 6 Meridian expands ETF line-up with launch of quality growth strategy ETF
Wichita, Kansas-based 6 Meridian has been at it again, launching a new equity ETF, the 6 Meridian Quality Growth ETF (SXQG), to run alongside last year’s launch of four ETFs which replicated their existing strategies, run in separately managed accounts.
The new ETF is an actively managed strategy to help investors capture exposure to those companies exhibiting strong growth characteristics. Andrew Mies, CIO with 6 Meridian says that the ETF products have amassed assets of over USD500 million for their largely high net worth customer base, and that comes with a growing realisation of how much easier it is for them come tax return time.
“The feedback has been exceptional,” Mies says. “The amount of tax savings has been impressive but most people didn’t appreciate how much transactional activity took place until this year when they did their tax forms.”
This fifth ETF is focused on American growth companies and is designed to fill what Mies felt was a hole in the 6 Meridian line-up.
SXQG’s portfolio is constructed using a quantitatively driven methodology designed to emphasise high quality securities. The selection process begins with companies in the broad US equity market. From this initial universe, micro-cap companies, with a market capitalisation of less than USD500 million are excluded. Quality is defined as high and improving profitability; low leverage and low default probability; and low net equity and debt issuance relative to dividends and net buybacks. Securities are first ranked on a composite of several quality-focused variables intended to measure profitability, growth, and ability to service financing obligations. The fund rebalances twice a year.
“It’s the most rapidly growing piece of the market and comes from client requests and lots of research,” he says. The ETF was launched in a challenging week and against a backdrop of a cyclical return to value.
“High quality growth companies do well in those cycles and continue to do well in a year like 2020 not a great year for the types of companies we own so we feel the timing is very good,” he says.