The Distillate Small/Mid Cash Flow ETF (DSMC) seeks to provide exposure to small and mid-cap U.S. companies selected based on their free cash flow generation capabilities. This actively managed equity ETF focuses on identifying undervalued smaller companies with strong cash flow characteristics.
How It Works
DSMC employs an active management approach using Distillate Capital's proprietary methodology to screen small and mid-cap stocks based on free cash flow metrics and valuation criteria. The fund's managers analyze companies' ability to generate sustainable cash flows relative to their market valuations, concentrating holdings in firms they believe are trading below intrinsic value. Portfolio construction emphasizes quality cash flow generators while maintaining diversification across sectors and market capitalizations within the small/mid-cap universe.
Key Features
- Active cash flow-focused strategy targeting undervalued small/mid-cap companies often overlooked by large institutional investors
- Recently launched in August 2023, offering exposure to Distillate Capital's proven value-oriented investment methodology
- Zero expense ratio currently listed, though actual fees likely higher once fully operational and disclosed
Risks
- This ETF can lose value if small and mid-cap stocks underperform, which historically occurs during market stress when investors flee to large-cap safety
- Active management risk means the fund could underperform passive small/mid-cap indexes if stock selection proves unsuccessful over time
- Small and mid-cap stocks typically experience 20-50% greater volatility than large-cap stocks during market downturns and economic uncertainty
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with 3-7 year time horizons seeking active small/mid-cap exposure. High risk tolerance required due to small-cap volatility and active management uncertainty. Appropriate for investors comfortable with newer fund launches and seeking alternatives to passive small-cap index strategies.