Kovitz Core Equity ETF (EQTY)

The Kovitz Core Equity ETF (ticker EQTY) is a concentrated, actively managed portfolio of roughly forty to sixty of the largest US companies, selected by investment managers at Kovitz who apply disciplined fundamental analysis to find firms trading below intrinsic value and likely to deliver steady, long-term returns.

The case for active management in a crowded field

The vast majority of US equity assets flow into passive index funds that automatically hold all or most of the S&P 500, charged by the fiction that beating an index is impossible. Kovitz takes the opposite view: that skilled analysts who study financial statements, competitive dynamics, and management quality can find stocks that the market has mispriced. EQTY is the vehicle for this bet.

The fund’s strategy is deliberately narrow. Rather than holding hundreds of stocks, Kovitz selects a curated list of firms it genuinely knows well — typically forty to sixty holdings. This concentration allows the fund to express meaningful conviction: each position represents a larger slice of the portfolio than it would in a broad index, and each is there because Kovitz believes it is a genuine buy at the current price.

What Kovitz looks for

The firm’s fundamental analysis focuses on companies with durable competitive advantages, predictable earnings, and financial strength. Kovitz tends to avoid high-growth software companies trading at speculative multiples, and instead leans toward more-mature industrial, financial, and consumer businesses where there is less disagreement about what the company is worth. The result is a portfolio that often looks somewhat old-economy compared to a market-cap-weighted index, but is positioned to avoid catastrophic mistakes and to deliver steady returns.

Common Kovitz holdings have included large industrials, health-care firms with branded drugs or medical devices, regional banks, and food and beverage producers — not because Kovitz is pessimistic about growth, but because these firms’ intrinsic values are easier to pin down and less dependent on optimistic assumptions.

The cost of concentration and conviction

Holding only forty to sixty stocks instead of five hundred or five thousand carries costs and benefits that cut both ways. On the benefit side, Kovitz can take positions large enough to matter, and the fund manager can meaningfully reduce risk by avoiding catastrophic positions. On the cost side, any mistake in stock selection is magnified; if Kovitz makes a bad call on a position that represents five percent of the fund’s assets (plausible in a forty-stock portfolio), it will hurt performance more visibly than a bad call on a 0.2 percent position in a five-hundred-stock fund.

The fund’s moderate expense ratio — higher than a passive index fund but lower than some active managers charge — reflects this trade-off. Kovitz is not using armies of PhD physicists building machine-learning algorithms, but it is also not just buying a list of stock tickers. The cost is the payment for judgment, which has value only if judgment is right.

Performance, volatility, and time horizon

Because EQTY holds a concentrated, actively selected list rather than a broad index, its year-to-year performance can diverge significantly from the S&P 500. In years when value stocks outperform growth, or when large, stable firms beat smaller, riskier ones, EQTY tends to do well. In years of momentum-driven rallies or when software and technology stocks dominate, EQTY can lag. Neither outcome should surprise an investor aware of the fund’s positioning.

The fund is designed for investors with multi-year or longer holding periods and conviction that value and quality matter. For traders or investors who move between strategies frequently, the volatility relative to an index can be frustrating.

Sector exposure and risks

Kovitz’s tendency to avoid high-growth, high-valuation stocks means EQTY’s Technology weighting tends to be lighter than the broad market. Financials, Industrials, and Healthcare typically represent larger slices of the portfolio. This sector tilt is not hidden or accidental; it flows directly from the manager’s view of where value is most likely to be found.

The primary risk to EQTY is that concentrated, concentrated selection combined with the manager’s value bias becomes a losing bet. If the next decade belongs to fast-growing, unprofitable software companies while mature, profitable industrials stagnate, EQTY’s performance will suffer. The fund accepts this risk in return for the possibility of outperforming through discipline and research when the broader market is chasing bubbles.