Victory Capital Adds VictoryShares® Small Cap Free Cash Flow ETF to its ETF Lineup
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Insights
The launch of the VictoryShares Small Cap Free Cash Flow ETF (SFLO) by Victory Capital introduces a new investment vehicle focused on U.S. small-cap companies with strong free cash flow yields and growth potential. This product expansion is significant as it taps into a niche market of small-cap companies, which are often associated with higher growth potential but also higher risk compared to larger, more established companies.
From a financial analysis perspective, the emphasis on free cash flow is crucial. Free cash flow is the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It is an important indicator of a company's financial health and its ability to invest in growth, pay dividends, or reduce debt. An ETF that targets companies with high free cash flow yields may be appealing to investors seeking a balance between growth and financial stability in the small-cap segment.
However, investors should consider the inherent volatility associated with small-cap investments. While the screening methodology aims to mitigate some risk by focusing on historical and projected free cash flows and eliminating companies with poor growth characteristics, market dynamics can still significantly impact the performance of these investments.
Victory Capital's strategic decision to launch SFLO aligns with a broader industry trend of offering specialized ETFs that cater to specific investment strategies. By focusing on small-cap companies with robust free cash flows, the ETF differentiates itself from broader market index funds and provides a targeted approach for investors looking to diversify their portfolio within the small-cap space.
The Victory U.S. Small Cap Free Cash Flow Index, which SFLO tracks, uses a rules-based methodology to identify potentially undervalued small-cap stocks that may offer a better risk-return profile. The investment strategy employed by SFLO could potentially offer a hedge against market downturns, as companies with strong free cash flows may be better positioned to weather economic challenges.
It is important for stakeholders to monitor the performance of SFLO relative to other small-cap funds and the overall market to evaluate the effectiveness of its investment strategy. The fund's success will depend on its ability to consistently identify small-cap companies that can sustain high free cash flow yields and deliver on growth expectations.
The introduction of SFLO by Victory Capital can be seen as a response to the current economic environment, where investors are increasingly searching for investment opportunities beyond traditional large-cap stocks. Small-cap companies can play a pivotal role in economic growth, as they often lead innovation and job creation. However, they can also be more sensitive to economic downturns, which is why a focus on free cash flow is pertinent.
Given the cyclical nature of small-cap stocks, the timing of such a fund launch could be indicative of Victory Capital's outlook on the economic cycle and its potential impact on smaller companies. A strong free cash flow yield is often associated with a company's ability to sustain operations and growth without relying on external financing, which is particularly valuable in a rising interest rate environment where borrowing costs are higher.
Investors should be aware of macroeconomic factors that could influence the performance of small-cap stocks, such as changes in interest rates, inflation and GDP growth. These factors can have a disproportionate impact on small-cap companies and, consequently, on the performance of SFLO.
SFLO seeks to provide investment results that track the performance of the Victory
“We are excited to expand our free cash flow lineup with the introduction of SFLO,” said Mannik Dhillon, CFA®, CAIA®, President, Investment Franchises and Solutions, for Victory Capital. “SFLO will take the innovative methodologies employed by the VictoryShares Free Cash Flow ETF (VFLO) to the small cap segment. Investors will now be able to capitalize on companies with attractive free cash flow yields without sacrificing growth potential in the small cap allocation of their portfolios.”
About Victory Capital
Victory Capital is a diversified global asset management firm with
Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 11 autonomous Investment Franchises and a Solutions Business, Victory Capital offers a wide array of investment products and services, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, a 529 Education Savings Plan, and brokerage services.
Victory Capital is headquartered in
Carefully consider a fund's investment objectives, risks, charges and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit www.victorysharesliterature.com. Read it carefully before investing.
The Victory
This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month free cash flow and next 12-month forward free cash flow. Free cash flow (FCF) represents the cash that a company is able to generate after accounting for capital expenditures. Enterprise value (EV) measures a company's total value, often used as a more comprehensive alternative to equity market capitalization.
The Fund invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Derivatives may not work as intended and may result in losses. Large shareholders, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of shareholders, including large inflows or outflows, may adversely affect other shareholders, including potentially increasing capital gains. Investments in mid-cap companies typically exhibit higher volatility. The value of your investment is also subject to geopolitical risks such as wars, terrorism, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies. Investments in small-capitalization companies involve greater risks than those associated with larger, more established companies. Investing in companies with high free cash flows could lead to under performance during periods when such investments are unpopular, and fluctuations in market conditions, industry disruptions, or company-specific factors may jeopardize the generation of free cash flow.
Distributed by Foreside Fund Services, LLC (Foreside). Foreside is not affiliated with Victory Capital Management Inc. (VCM), the Fund's advisor. Neither Foreside nor VCM are affiliated with VettaFi.
Investments involve risk including possible loss of principal. ETFs have the same risks as the underlying securities traded on the exchange throughout the day. Redemptions are limited and often commissions are charged on each trade, and ETFs may trade at a premium or discount to their net asset value.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231221923285/en/
Investors:
Matthew Dennis, CFA
Chief of Staff
Director, Investor Relations
216-898-2412
mdennis@vcm.com
Media:
Jessica Davila
Director, Global Communications
210-694-9693
jessica_davila@vcm.com
Source: Victory Capital Holdings, Inc.
FAQ
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