VictoryShares VFLO nears third anniversary after strong gains

VictoryShares Free Cash Flow ETF (VFLO) is approaching its three-year mark, has attracted roughly $8 billion in assets and has outperformed competing free cash flow strategies, according to Todd Rosenbluth, head of research at VettaFi. VFLO has beaten its Morningstar category in each calendar year since launch and outpaced Pacer’s COWZ by about 1,000 basis points so far this year.

The ETF tracks an index that starts with free cash flow yield, measuring free cash flow against a company’s enterprise value, and then applies a forward-looking growth filter. The index reweights holdings on fundamentals each quarter; a scheduled quarterly rebalance took place shortly after the discussion with Rosenbluth.

Rosenbluth described the growth filter as a distinguishing feature of the index, saying it looks forward and uses growth to assess companies. He noted that the quarterly rebalancing and fundamental weighting can result in adding lower-priced stocks and trimming positions that have risen in price.

The fund holds about 50 stocks and leans away from the largest market-cap names. At the time of the discussion, there was no exposure to the largest technology megacaps commonly grouped as the Mag Seven, because those companies did not meet VFLO’s free cash flow criteria. The largest reported individual holdings then included SanDisk and Dell.

Cost and income data from the issuer show a net expense ratio of 39 basis points and a dividend yield near 1.1% as of the end of May. Rosenbluth cited comparisons with the Russell 1000 Value Index, noting stronger earnings growth for VFLO while price-to-book and return on equity metrics were similar.

Advisors and investors have positioned VFLO in several ways: as a complement to market-cap-weighted index funds to reduce concentration in mega-cap stocks, alongside active strategies to introduce rules-based fundamental exposure, and paired with other factor ETFs, including VictoryShares’ Free Cash Flow Growth ETF (GFLW), to combine value and growth characteristics.

VettaFi serves as the index provider for VFLO and receives a licensing fee. VictoryShares is the fund issuer; VettaFi is not the issuer or sponsor and has no obligation in the fund’s issuance or administration. As VFLO reaches its third year of trading, it becomes eligible for Morningstar and Lipper rating cycles.