IFLO and GRIN let advisors tap international free cash flow

At a conversation at Exchange with VettaFi, Michael Mack, client portfolio manager for VictoryShares and Solutions, outlined two new ETFs that target developed-market companies outside the United States that generate high free cash flow. The funds are marketed to financial advisors as ways to access cash-generating international firms.

Free cash flow is the cash a company produces after paying for capital expenditures. That cash can be used to reinvest in the business, pay dividends, reduce debt or return money to shareholders. Portfolio managers often use free cash flow to assess a company’s financial strength because it reflects cash actually available to the business.

The VictoryShares International Free Cash Flow ETF, ticker IFLO, tracks an index constructed to identify profitable developed-market firms, excluding the U.S., that produce high free cash flow from invested capital and show growth characteristics. The IFLO index weights constituents by a modified free cash flow yield.

The VictoryShares International Free Cash Flow Growth ETF, ticker GRIN, follows an index focused on profitable international companies that combine free cash flow yield with higher growth traits. The GRIN index weights constituents by free cash flow modified absolute momentum. Mack highlighted GRIN as a way to capture the “AI build-out through international industrials and defense.”

Mack argued that many international allocations have traditionally leaned toward classic value stocks or speculative small caps and that a free cash flow framework provides a different method to identify companies with stronger cash generation. He said such firms can have the resources to reinvest or withstand downturns without relying on speculative growth assumptions.

VettaFi LLC is the index provider for both indexes and receives an index licensing fee. VettaFi does not issue, sponsor, endorse or sell the ETFs and has no obligation or liability related to their issuance or marketing. VictoryShares ETFs are distributed by Victory Capital Services, Inc.

The prospectuses list risks investors should consider. International investments may be more volatile than U.S. stocks because of political, regulatory, economic, currency and issuer-specific developments. ETFs can trade at a premium or discount to net asset value. Both IFLO and GRIN are new funds with limited operating histories. Concentrated positions by country, region or sector can increase volatility, and investing in high free cash flow companies can underperform when those stocks fall out of favor or when industries face disruption.

Index construction rules cap sector, country and individual security weights, which can produce portfolio exposures different from market-cap benchmarks. Fund performance may diverge from underlying indexes, and large shareholders can influence fund flows and tax outcomes. Prospective investors are advised to read each fund’s prospectus for details on objectives, risks, charges and expenses.