Canaccord has launched the Quest Global Equity Cashflow Compounder Units ETF, using the Canadian investment bank’s proprietary analytics tool to assess the best 30 of 20,000 global equities.
Quest, a quantitative screen first developed in the 1990s by Collins Stewart under its then chief executive Terry Smith, uses a cashflow return on assets approach to cut through companies’ attempts to massage their profit and loss figures and circumvent the problem of different accounting treatments of depreciation of assets.
Canaccord bought Collins Stewart in 2011 and Smith launched FundSmith in 2010 and his flagship Fundsmith Equity Fund.
Graham Simpson, head of Canaccord Quest Research, told The Times the ETF’s four key aims were to “capture the best cashflow returns, the most predictable returns, the strongest balance sheets and the most liquid working capital ratios”.
The holdings, mostly US companies, will be rebalanced quarterly as the ETF tracks a benchmark developed by index provider Solactive.
At the start of this month, the top five positions were Arista Networks, the cloud networking services group; Cognizant Technology Solutions, an IT company; Intuit, a fintech; Monolithic Power Systems, a semi-conductor business; and Amphenol Corporation, an electronics group.
It currently has no exposure to the “Magnificent 7” stocks of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, which dominated the US market from 2023-25.
Simpson said: “We see our ETF as an alternative diversification to Mag7 and AI concentrations, offering global equity exposure without relying excessively on a handful of mega-cap stocks, and without potentially giving up the performance.”
Based on historic performance, the Quest index has delivered an annualised return of 15.27% since 2015 versus 13.67% for the S&P 500 and 11.42% for the MSCI World Total Return USD indices.
The ETF will have a total expense ratio of 0.55%.
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