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Rating:A $785MM-AUM Firm Uncorks a Third Fund Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, October 7, 2022

A $785MM-AUM Firm Uncorks a Third Fund

Reported by Neil Anderson, Managing Editor

The team at a five-year-old, Midwestern shop with a $785-million-AUM (as of yesterday) pair of ETFs has finished brewing their third fund.

Thomas M. "Tom" Cole
Distillate Capital
Co-Founder, CEO
Yesterday, Tom Cole, co-founder and CEO of Chicago-based Distillate Capital Partners LLC, and Jay Beidler, co-founder, unveiled the launch of the Distillate Small/Mid Cash Flow ETF (DSMC on the NYSE Arca, Inc.). The new fund's inception date was Wednesday, its expense ratio is 55 basis points, and it had $2.48 million in AUM as of yesterday.

DSMC is a series of ETF Series Solutions, with Distillate as investment advisor and Vident Investment Advisory, LLC as subadvisor. (VIA also subadvises Distillate's first two ETFs.) The new fund's PM team includes: Beidler, Distillate co-founder Matthew Swanson, and VIA portfolio managers Austin Wen and Rafael Zayas.

The idea behind DSMC is to invest about 150 small and mid-cap stocks using a systematic approach that takes into account current and future fee cash flow, quality, and valuations. The fund is Distillate's first actively managed one.

Cole describes small and mid-cap equity investing as "ripe with opportunity."

"To this point, small- and mid-cap offerings have not taken a discerning eye to this universe of stocks, ignoring the significant dispersion to be found across valuations, high levels of leverage on the books of many names, and the fact that almost 20% of companies making up the largest small-cap index are not expected to generate positive free cash flow in the next 12 months," Cole states. "Across market caps and exposures, we believe in selectivity and this category in particular requires a systematic methodology when looking at the true fundamental value factors and risks of each stock."

"Value isn't dead," Beidler states. "It's just not being measured properly." 

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