The episode of "Behind the Ticker" features Sal Esposito from Zacks, focusing on two of their ETFs: ZECP (Earnings Consistent Portfolio) and SMIZ (Small Mid Cap Core ETF). Sal's journey began at UBS, transitioning from various roles to Zacks, where he embraced the ETF space. Zacks, starting in 1978, specializes in earnings estimate revisions and surprises, crafting strategies around quality and consistency.ZECP, designed as a core portfolio piece, invests in large cap, quality companies demonstrating consistent earnings and resilience through market cycles. It typically includes 50-65 names, chosen through a rigorous screening process emphasizing historic and forecasted EPS stability.SMIZ targets opportunities in the small and mid-cap space, focusing on earnings estimate revisions and market anomalies, holding around 198 names. Unlike ZECP, it does not prioritize earnings consistency but rather seeks to exploit less covered market segments for alpha.Zacks also offers "Zacks Plus," a unique product combining ETFs and SMAs into holistic solutions, tailored across risk spectrums without strategist fees. It allows advisors to deliver more sophisticated, efficient portfolio options, focusing primarily on domestic equities.Sal suggests ZECP can complement large cap equity exposures like SPY, offering downside protection through its focus on quality. SMIZ serves as a dynamic small to mid-cap exposure, aimed at capturing alpha in less scrutinized market segments. For more information on Zacks and their ETF products, Sal recommends visiting zacksetfs.com or contacting etfproducts@zacks.com.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Sal Esposito covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
And those, they're concentrated SMAs. So we're not giving you exposure to 700 names, the portfolios, the model portfolios range from about 47 holdings to 120. No, so last question here, if you're not using XX plus, right, and I'm an RIA, I've already have my model portfolio set and you're just selling the opportunity to add ZCP or Smiths into a portfolio, where are you putting these in an overall model portfolio construction? I just assume ZCP is probably in a line with large cap equity exposure.
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.
Market Context and Positioning
So from looking at both of the ETFs in your lineup, there seems to be this theme of resilience and times of volatility. So why is managing risk and volatility so important? Meaning like what can minimizing volatility or standard deviation mean to an investor over the long term?
So there's not really any holdings in the portfolio that are above two to 2.1 percent, right? So it's fairly, evenly distributed. So let's talk, I want to talk about Zax Plus. Can you just say what it is? And then really how it works.
And you don't have to go down the road of pulling in three or four different managers doing three or four different things, right? We, we are primarily a domestic equity shop. I mean, most of the, most of the tilts are run that have single stock exposures are domestic equity, right? Our international sleeve is a, is a model comprised of third party country specific ETFs. So we know our bread and butter is domestic equities. And that's how we're running our SMA sleeves as well.
We continue our live from the Exchange ETF Conference series today with Sal, Esposito. He is from Zax, and we are going to talk about two of their ETFs today. ZECP, which is an earnings consistent portfolio, and Smith's a small midcap core ETF ticker SMIZ. We talk about Zax business as a whole, as well as a really unique product offering that they offer, advisors called Zax plus, I think if you are an advisor listening to this, this would be an interesting thing for you to take a look at for you and your clients.
Notable Insights
"The opportunity to get into the ETF space kind of came out of, it was kind of came out of left field."
"No, so last question here, if you're not using XX plus, right, and I'm an RIA, I've already have my model portfolio set and you're just selling the opportunity to add ZCP or Smiths into a portfolio, where are you putting these in an overall model portfolio construction?"
Key Takeaways
- It allows advisors to deliver more sophisticated, efficient portfolio options, focusing primarily on domestic equities.Sal suggests ZECP can complement large cap equity exposures like SPY, offering downside protection through its focus on quality.
- The conversation explores important themes in active management relevant to today's advisor landscape.
- The conversation explores important themes in small & mid cap relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Sal Esposito highlights important considerations around etf structure. 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 etf structure 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 Sal Esposito, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.