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Sal Esposito, Zacks Investment Management
Sal Esposito, Zacks Investment Management

Zacks keeps it active

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Zacks Investment Management started doing investment research in 1978 and in 1992 started its investment management arm, initially with SMAs and mutual funds.

2021 saw the firm launch its first ETFs in a division headed up by Sal Esposito, offering active funds, including the first product, Zacks Earnings Consistent Portfolio ETF (ZECP) which represents a portfolio of companies that exhibit a track record of moving through recessionary periods with little to minimal impact on aggregate earnings growth relative to the overall equity market.

 The fund’s portfolio is composed of 50-120 US exchange-listed companies with the highest stability in their historic and forecasted earnings per share (“EPS”). The quantitative screens are combined with the qualitative judgment of the portfolio manager based on an analysis of financial statement filing consistency, profitability, earnings stability in recessionary periods, valuation, and improving fundamentals.

Esposito explains that this fund is active indeed with a 25 per cent turnover of its portfolio in a year while the firm’s second fund SMIZ is off the scale active, with a 100 per cent turnover of its portfolio of small – mid cap stocks.

“It’s all based on our research and there are more opportunities and market anomalies in the small to mid-cap stocks,” Esposito explains.

For the next series of ETFs, the team is looking at more solutions to complement existing offerings in the Zacks product line-up. “Our new products will fit into the crevices of the existing suite to make a well-rounded product offering,” he says. 

The firm has seen recent asset growth in its ETFs having created a wrapper that includes SMAs and ETFs as a solution for end clients. “Zack’s Plus is a holistic account with exposure to ETFs and single stock securities using risk-based models,” Esposito explains.

“Fee-based advisers are starting to understand the active ETF space”, he says.

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