The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The top ten holdings of the Russell 3000 are: EXXON MOBIL CORP (NYSE:XOM), APPLE INC (NASDAQ:AAPL), INTL BUSINESS MACHINES (NYSE:IBM), CHEVRON CORP (NYSE:CVX), MICROSOFT CORP (NASDAQ:MSFT), JOHNSON & JOHNSON (NYSE:JNJ), PROCTER & GAMBLE CO (NYSE:PG), GENERAL ELECTRIC CO (NYSE:GE), AT&T INC (NYSE:T), and PFIZER INC (NYSE:PFE).
TOTAL ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVER AND/OR EXPENSE REIMBURSEMENT: 0.99%
PRINCIPAL INVESTMENT STRATEGIES
The Fund is an actively managed exchange-traded fund that seeks to achieve its investment objective by primarily investing in the broad U.S. equity market, as represented by the Russell 3000® Index. The Fund seeks to achieve this goal by investing in stocks with liquidity and fundamental characteristics that are historically associated with superior long-term performance. Based on extensive historical research, Trim Tabs Asset Management, LLC (“TrimTabs” or the “Sub-Advisor”) designed the following quantitative stock selection rules to make allocation decisions and to protect against dramatic over or under weighting of individual securities in the Fund’s portfolio.
Decile Ranking of Russell 3000 Stocks. The Sub-Advisor ranks stocks in the Russell 3000 by decile based on the following criteria:
- the decrease in their outstanding shares over approximately the past 120 days (“float shrink”);
- the increase in free cash flow (the money available to the company that is not used to pay for its daily operations) over approximately the past 120 days; and
- the decrease in leverage over approximately the past 120 days. Leverage is measured as the ratio of total liabilities to total assets. The Sub-Advisor uses the relative decrease in leverage rather than amount of leverage itself as a criterion because the degree of leverage varies across industries.
The top decile of each respective ranking consists of the stocks of the companies with (1) the strongest reduction in shares outstanding, (2) the strongest growth in free cash flow, and (3) the largest decrease in leverage, respectively.
Stock Selection Algorithm. The Sub-Advisor uses an algorithm to give a relative weight to the three decile rankings, combining them in a single ranking (combined ranking). The algorithm places a higher weight on the float shrink ranking, followed by the free cash flow ranking, followed by the leverage ranking. The Fund under normal circumstances invests in 80 to 120 stocks from among the tenth percentile of stocks with the highest combined ranking.
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