![Legendary value investor launches ETF... but it's not a mutual fund](https://image.cnbcfm.com/api/v1/image/107333110-1699910116ETF-SEG1-111323.jpg?v=1699910116&w=750&h=422&vtcrop=y)
Legendary value investor Jeremy Grantham is betting on a special caliber of stocks with his company’s first active ETF: the GMO US Quality ETF.
And he put GMO partner Tom Hancock on it.
“There’s a lot more interest in active ETFs than there was a few years ago,” Hancock told CNBC’s “ETF Edge” this week. “Coming from our clients, a lot of them are really excited about investing in ETFs. Of course, there are the tax benefits. But even among our institutional clients, just the ease of trading them is quite material.”
Hancock says the new ETF is built around companies that can sustainably deploy capital and high returns, with a focus on technology, health care and consumer staples.
According to GMO’s website, as of November 17, the ETF’s main holdings include Microsoft, UnitedHealth and Johnson & Johnson.
“(These companies) can do things that competitors can’t. Moats around their business. They have strong balance sheets,” he said. “These are warships that will remain relevant and important going forward.”
However, the stock’s performance has been mixed so far this year. Microsoft is up nearly 54% so far this year. Shares of UnitedHealth are nearly flat while Johnson & Johnson is down more than 15%.
“A better chance at outperformance”
ETF Store President Nate Geraci sees active ETFs as a natural evolution in the industry.
“If you think about an active manager trying to generate after-tax alpha, the ETF wrapper helps lower that hurdle. It offers a better chance at outperformance,” Geraci said.
He adds that ETFs can give active managers a better chance at long-term success.
Since its launch on Wednesday, the GMO US Quality ETF is up less than half a percent.
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