Michael Monaghan

Michael Monaghan spent 15 years on Wall Street — Goldman Sachs, the Carlyle Group, Sanford Bernstein, UBS — before leaving to build Beartooth, a technology company that let smartphones connect without cell service. That 12-year entrepreneurial journey, and a visit to the Smithsonian where he and his partner were struck by the iconoclastic nature of America's builders, led him to launch the Founders 100 ETF (ticker: FFF).

About Michael Monaghan and Founders ETFs

Michael describes his career as "the third act." Act one was a traditional Wall Street career spanning Goldman Sachs, a private equity fund with the Carlyle Group, Sanford Bernstein, and UBS. Act two was a 12-14 year entrepreneurial run building Beartooth, a technology product allowing smartphones to connect without cell service — which unexpectedly evolved into a defense business. Act three is the Founders 100 ETF, inspired by a visit to the Smithsonian where he and a former Bernstein colleague saw the Fort McHenry flag and were struck by the iconoclastic builders who shaped America.

The Founder Factor: Definition and Data

The fund defines "founder-led" strictly: the original creator of the company must still be running it as an executive. Not just serving as chairman, not running a division — actively leading the company. Dell qualifies because Michael Dell still runs it. Apple does not because Steve Jobs is no longer at the helm. Berkshire Hathaway was removed when Warren Buffett retired.

To validate the factor, Monaghan's team built an 11,000-stock database spanning 30 years of data — hand-constructed from old press clippings and SEC filings because this data doesn't exist in Bloomberg or FactSet. The research shows founder-led companies outperform the S&P by 3-5% annually, consistent with a Bain study showing founder companies in the S&P 500 outperformed by 3x over 25 years.

Fund Mechanics

The construction process starts with the 200 largest publicly traded founder-led companies, tracked under the Bloomberg index ticker FONDS. A Bernstein-style factor model selects the 100 best from that universe. The portfolio uses modified market-cap weighting with a 7% position cap at quarterly rebalance — excess capitalization flows down to smaller, faster-growing companies. The fund is written as 80% rules-based and 20% discretionary, though in practice it's almost entirely systematic. The discretionary sleeve exists primarily to capture IPOs between quarterly rebalances.

Why Founders Drive Outperformance

Monaghan points to founders' unique combination of vision, courage, moral authority, and execution ability. He cites Mark Zuckerberg's pivot away from the metaverse as an example — a board-hired CEO likely couldn't have made that call as decisively. Similarly, Elon Musk's plan to merge SpaceX and xAI to solve compute and cooling constraints for artificial intelligence reflects the kind of bold, constraint-solving thinking that distinguishes founders.

"We're not an investment management company. We manage investments, but we're a product development company. The idea was to build the best risk-reward product for compounding your wealth."

Positioning Against QQQ

Monaghan makes a direct case that FFF is a one-for-one improvement over QQQ. He argues that the Nasdaq, originally designed as an innovation index, has diluted its innovation factor by adding slow-growth companies to earn more listings. FFF runs 85% active share against the S&P 500 and 70% against QQQ — significantly higher differentiation than traditional active managers who used to tout 1-7% active share.

Distribution Strategy

In a market where 10 new ETFs launch weekly, Monaghan acknowledges the noise but argues that 90-95% of launches aren't long-term compounders. His approach combines personal outreach (Paul Graham's "do things that don't scale"), automated tools for reaching smaller RIAs, and content partnerships. The thesis resonates naturally with advisors whose clients are often founders themselves.

Names He's Watching

While the system picks the stocks, Monaghan is excited about potential future holdings: SpaceX (Elon Musk's generational entrepreneurship), Stripe (the Collison brothers — Monaghan was an early user), and Anduril (Palmer Luckey's mission to give warfighters better tools). But his most honest answer: "What I want to own are the ones I don't even know about yet."

Key Takeaways

• The Founders 100 ETF (FFF) owns 100 founder-led companies selected by a quantitative factor model from the 200 largest
• Founder-led companies have historically outperformed the S&P by 3-5% annually over 30 years of data
• The fund runs 85% active share vs. S&P 500 — dramatically higher differentiation than traditional active managers
• Position caps at 7% prevent mega-cap concentration; about 50% of historical performance came from names outside the top holdings
• The 80/20 rules-based vs. discretionary split exists primarily for IPO capture between quarterly rebalances

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 Michael Monaghan, including additional details on his entrepreneurial journey and fund construction, listen on Spotify, Apple Podcasts, or watch on YouTube.