Make MGMT work for you

Like pilots before takeoff, we use checklists throughout our investment process in an attempt to prevent easy mistakes. At root, management quality is a question of business judgement. Our detailed checklist structures consistent, contextual, comprehensive evaluation of each management team. Before investing, our investment team uses a checklist to answer three basic questions to evaluate management’s fit with the business and with our investment strategy. The detailed checklist also guides on-going “trust but verify” monitoring, which we believe is an important step in manufacturing consistent long-term returns with limited fundamental downside. When surprises strike, the right management is a crucial in an attempt to mitigate downside risk and, ideally, able to exploit disruption to accelerate long-term value.

Is management aligned with shareholders?

Tell us how someone gets paid, and we can tell you what they are likely to do. For example, if incentive compensation metrics are tied to revenue growth, you can bet that management will do everything possible to grow revenue, even if the profits are lousy and it destroys capital in the process. Great incentive plans reward balanced growth, profitability and capital efficiency. A significant equity component aligns short and long term interests.

Is management straightforward and reliable?

The “Say/Do” Ratio—actions speak louder than words. We expect management to have realistic plans to increase business value, tied to drivers they can influence, with observable milestones for accountability. We make sure management does what it says it will by crosschecking with external evidence and rigorous financial statement analysis.

Is management the right fit for the job?

A hammer is not the right tool for every job. We want the right people, in the right place, at the right time. A CEO with a great turnaround track record may not be the right fit for an emerging growth company, and vice versa. A CFO with a great consumer staples background, accustomed to juicing ROE with debt, could be a disaster at a cyclical company late in an expansion.

Extra points: does management have an ownership mentality?

Ownership mentality goes beyond professional commitment with “skin in the game” to an intrinsic drive to create a better way of doing things. It is uncommon (and sometimes difficult to distinguish from madness), but when the concept is hard-to-copy and offers a superior customer value proposition at prices competitors cannot match, it can drive tremendous long-term value creation.

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We believe ACTIVE management matters.  The MGMT ETF actively invests in a select group of stocks we seek to find and believe collectively, may provide a higher return potential compared to investing in a passive index

Why consider Active Management

If you put one hand in a bucket of ice, and the other in a boiling pot of water, on average you might feel fine.  We believe this is the approach that a Passive or index strategy employs. While Passive ETF’s are a cost effective approach, we believe that over the long-term, an active approach that is designed to identify higher quality companies and managed by astute management teams, will potentially lead to generating a higher return while mitigating risk. 

Consider Active Management

Our active strategy is highly selective seeking to capitalize on small and medium sized companies. There are companies too numerous to count making critical products you might not know even exist.  Did you know commercial airplanes have printers in the cockpit?  Or why? 

Can Active management help to manage my investment?

We believe it does. The process for selecting stocks for MGMT includes actively seeking to reduce the risk of losses for each stock.  In fact, taking aim at reducing risk in MGMT is critical in every step of our investment process.