Episode 15 of Behind the Ticker features Alejandro Garza, the Founder and Portfolio Manager of Aztlan Equity Management. Alejandro is the portfolio manager behind the Aztlan Global Developed Markets SMID Cap Strategy ticker AZTD. AZTD is Atzlan’s stock selection ETF, a unique rules-based strategy that selects the top 27 stocks based on fundamental factors. AZTD uses a proprietary 6-factor fundamental model to assign stock rankings: cash flow generation, value, growth, capital structure quality, earnings revisions and momentum. The Fund’s stock picks represent companies in developed markets across North America, Western Europe and Developed Asia, with market caps between $500 million and $10 billion. Energy, Real Estate and Pharmaceuticals are excluded. To learn more about Alejandro and AZTD visit www.aztlanetfs.com
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Alejandro Garza covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
And at the same time, if you are listed in Mexico, you have a very significant tax advantages. Basically, a 10% tax, compared to a 30 plus percent tax on on on on on on returns. So, we said, okay, we have this quantitative plus fundamental process, we're, we're specialized, or we, we, we, we like to say and think that we specialize in stock picking and we like to think that we're, we're good at it and we've had very good performance.
Number one, combining quantitative analysis with fundamental analysis. I think the combination of those two ways of approaching markets and investments is really helpful, and really provides for a competitive advantage when you combine those two aspects in an efficient way, quantitative analysis, and fundamental analysis. The other aspect that I thought that we could really make a difference was in terms of stock selection. Stock selection meaning you have to build a concentrated strategy if you really want to beat the market.
Market Context and Positioning
We also define nine sectors out of the 11 sectors of the general classification that we're used to. We exclude two sectors and one industry. The two sectors that are excluded, energy, and because it's a commodity, highly volatile, and in some parts of the macroeconomic curve, we also exclude real estate. A lot of our investors already have a lot of direct real estate exposure in their portfolios. So we don't want to have a double exposure there, so it's fluid real estate.
So it's unexplored that gives this segment a valuation advantage because it's underrepresented under bought 10, they tend to trade at a discount to the broader market. But then at the same time, they're large enough that they're not as volatile as a smaller companies that are below the 500 million mark. So we think it's really the sweet spot of the market where we have opportunities to find really interesting companies, really differentiated companies that have all the potential to grow into big caps, large caps, mega caps, and, and it's a very fertile ground for us to do our research process.
I'm Brad Roth, Chief Investment Officer of Thor Financial Technologies, and portfolio manager of THLV, the Thor Low Volatility ETF. Behind the Ticker, uncovers the inner workings of the ETF industry. We will interview portfolio managers and ETF service providers to dive deep into their work lives and their businesses. We will learn the inner workings of their strategies and what drives them as they continue to grow their company. Many of these individuals are entrepreneurs, and will have unique and compelling insights to share as much goes on behind the Ticker.
Yes, well, I started the firm almost seven years ago, 2016, and right at that point I had spent 10 years with the Aschmore Group, and before that with emerging markets management, which used to be one of the pioneer years in emerging markets investing out of Washington, D.C.
Key Takeaways
- AZTD is Atzlan’s stock selection ETF, a unique rules-based strategy that selects the top 27 stocks based on fundamental factors.
- The conversation explores important themes in active management relevant to today's advisor landscape.
- The conversation explores important themes in energy relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Alejandro Garza highlights important considerations around quantitative investing. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of quantitative investing and active management discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Alejandro Garza, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.