In a recent episode of Behind the Ticker, Catherine LeGraw, asset allocation strategist at GMO, shared insights into the firm’s approach to value investing and their newly launched ETFs, including GMOV, their U.S. value ETF. LeGraw, who joined GMO in 2013 after working at BlackRock and Barclays Global Investors, brings a top-down perspective to asset allocation, seeking valuation-driven opportunities across asset classes. She emphasized GMO’s commitment to long-term value investing and its employee-owned structure, which allows the firm to focus solely on clients’ best interests.

LeGraw explained that GMOV stands out among value-focused ETFs due to three key differentiators. First, GMO takes a top-down approach, looking for entire groups of dislocated or misvalued stocks, rather than relying solely on bottom-up stock selection. Currently, the fund focuses on the cheapest 20% of the market, which GMO believes represents a tremendous opportunity for deep value investing. Second, the firm does not rely on standard accounting data but instead restates financials to reflect true underlying value, such as treating research and development expenses as investments rather than operating costs. Lastly, GMO incorporates forward-looking projections tailored to each company’s unique characteristics, providing a more accurate estimate of future profitability.

GMOV also applies rigorous portfolio construction techniques to balance deep value opportunities with quality and growth characteristics, avoiding common value traps. LeGraw highlighted GMO’s use of proprietary red flag screening, which examines accounting metrics, management behavior, and market signals to identify potential risks. The fund consists of approximately 150 names, with sector weightings determined by valuation attractiveness rather than traditional market cap constraints. Unlike many passive value ETFs that may be overweight in sectors like utilities, GMO’s active approach allows them to avoid sectors they consider overvalued.

In addition to discussing the U.S. market, LeGraw also touched on GMOI, their international value ETF, which she believes offers an even greater opportunity given the relative cheapness of international equities and the potential tailwind of currency valuation shifts. She emphasized that value investing is currently priced for significant outperformance, with deep value trading at historically attractive levels.

For advisors and investors looking to diversify their portfolios away from an overconcentration in U.S. large-cap growth, LeGraw suggests GMOV and GMOI as substitutes for passive value exposure or as tactical allocations to capitalize on the current value opportunity.

In a recent episode of Behind the Ticker, Kevin Carter, founder of EMQQ Global, shared his journey into investment management and the inspiration behind his suite of emerging market internet ETFs, including INQQ, which focuses on India’s rapidly growing internet sector. With a background that began at Robertson Stephens in 1992 and included pioneering direct indexing and active indexing, Carter’s passion for emerging markets and digital transformation culminated in the creation of EMQQ Global and its targeted ETF offerings.

Carter discussed the investment thesis for INQQ, highlighting India’s unique position as the world’s largest and fastest-growing emerging market. With a population exceeding 1.4 billion, robust demographics, and a booming middle class, India presents unparalleled opportunities for consumption-driven growth. Carter emphasized India’s ongoing infrastructure and technological advancements under Prime Minister Modi, particularly the “India Stack,” a revolutionary digital public infrastructure. The stack has transformed India’s economy by enabling biometric identification, digital payments, and financial inclusion for over 800 million people in just a few years.

INQQ provides investors exposure to the burgeoning internet sector in India, which Carter described as being in its early stages of growth. The ETF focuses on publicly traded Indian internet companies that meet market cap and liquidity thresholds, offering a diversified portfolio across various verticals, including e-commerce, payments, and online travel. Companies like Paytm and MakeMyTrip exemplify the opportunities available as digital adoption accelerates, with many sectors still in the nascent stages of development.

Carter underscored the importance of INQQ as a standalone investment opportunity within emerging markets, appealing to those seeking targeted exposure to India’s digital transformation.

In a recent episode of Behind the Ticker, David Dziekanski, founder and CEO of Quantify Funds, introduced his firm’s first ETF, the STKD Bitcoin and Gold ETF (ticker: BTGD). With 17 years of experience in the investment and ETF industry, including 11 years as a partner at Tidal Financial Group, Dziekanski launched Quantify Funds to bring innovative, efficient investment solutions to market. BTGD represents a novel approach to leverage ETFs, offering exposure to both Bitcoin and gold in a single investment vehicle.

BTGD is structured as a “stacked” ETF, providing $1 of exposure to Bitcoin and $1 of exposure to gold for every $1 invested. This 50-50 blend offers a leveraged, long-term approach without the typical path dependency or decay associated with traditional leverage products. The fund utilizes a combination of futures and exchange-traded products to optimize leverage and manage rebalancing efficiently. Dziekanski explained that the fund targets a 5-7% rebalance drift to minimize trading costs while maintaining the desired asset allocation.

The rationale behind combining Bitcoin and gold lies in their shared status as scarcity assets. Gold, with its historical role as a store of value, and Bitcoin, often referred to as “digital gold,” both offer protection against currency debasement. Dziekanski noted that the mining rates of Bitcoin (0.86% annually) and gold (1.75% annually) are significantly lower than the 7-9% annual currency printing rates of developed nations, making them ideal assets for a hedge against inflation and declining currency values.

Dziekanski also highlighted how the differing volatility and correlations of Bitcoin and gold enhance the portfolio’s resilience. Bitcoin’s higher volatility is balanced by gold’s stability, allowing for effective rebalancing during market shifts. Historical data shows that gold has performed well during past crypto winters, providing diversification benefits and mitigating drawdowns. Advisors are encouraged to view BTGD as a debasement hedge or a high-volatility alternative in portfolios, with suggested allocations ranging from 2-5%.