A new active ETF launched this week with a unique spin on how it picks the companies to include in the fund.
What Happened: ROC Investments launched the Return On Character ETF, which is the world’s first ETF comprised of select companies based on the “behaviors of their CEO and senior executive teams.” It is listed on CBOE with the ticker ROCI.
The ETF focuses on four pillars for selecting companies to be included in the actively managed ETF. The company said it will invest in “character-led organizations.” The ETF includes U.S. companies.
“The four pillars of ROC’s character model — integrity, responsibility, forgiveness, and compassion — are the same principles parents seek to instill in their children, and yet they are often found lacking in the financial world,” ROC Investments founder and CEO Dan Cooper said.
The ROC ETF is based on research from consulting firm KRW International. The research showed companies that had leadership teams with high character scores had higher workforce engagement, higher profitability and lower levels of corporate risk.
The ETF will hold 75 to 150 stocks that fit the criteria and receive the highest “composite character scores.”
Character scores will be evaluated on an annual basis and the weightings will be evaluated quarterly. The ETF can remove stocks from companies that see their CEO’s character score drop or when it is announced that a high-character CEO is exiting.
“Our hope is that the ROC ETF will show that not only does character matter, but it is the best way to live and invest.”
The ETF comes with an expense rate of 0.49%.
Related Link: What Is An ETF?
Inside The ETF: The ROC ETF holds 106 stocks according to the website. Among the holdings are many large-cap and “blue chip” companies such as Walt Disney Co (NYSE:DIS), Nike Inc (NYSE:NKE), Target Corporation (NYSE:TGT) and other consumer product companies.
The current top 10 holdings in the ETF are:
- Apple Inc (NASDAQ:AAPL): 6.6%
- Microsoft Corporation (NASDAQ:MSFT): 6.1%
- Amazon.com, Inc. (NASDAQ:AMZN): 3.9%
- UnitedHealth Group Inc (NYSE:UNH): 2.8%
- Berkshire Hathaway Inc (NYSE: BRK.B): 2.8%
- Verizon Communications Inc (NYSE:VZ): 2.8%
- Comcast Corporation (NASDAQ:CMCSA): 2.7%
- Costco Wholesale Corporation (NASDAQ:COST): 2.7%
- Zoetis Inc (NYSE:ZTS): 2.2%
- NVIDIA Corporation (NASDAQ:NVDA): 2.1%
A look through the 106 companies included in the ETF also shows investors two of the largest companies being omitted.
The ETF does not include investments in Tesla Inc (NASDAQ:TSLA) or Meta Platforms Inc (NASDAQ:FB).
The omission of Tesla comes as CEO Elon Musk is an active member on Twitter Inc (NYSE:TWTR) and sometimes shares questionable memes and takes that could impact the character score determined.
Meta Platforms CEO Mark Zuckerberg has also been the target of organizations questioning the practices the company uses in targeting children and in acquiring companies.