Zacks Focus Growth ETF (GROZ)

Zacks Focus Growth ETF (GROZ) is a concentrated actively managed equity fund that uses a combination of algorithmic analysis and fundamental research to select roughly 40 large-cap stocks the managers believe will deliver above-market earnings growth.

Selection via algorithm and research

Zacks Investment Research built GROZ around a hybrid approach: proprietary algorithmic screening identifies stocks that show near-term catalysts for earnings surprise, while Zacks fundamental analysts then apply judgment on which candidates merit inclusion in the fund. The result is a portfolio of 40-odd names, each meeting both quantitative momentum signals and analyst conviction. The fund is tech-concentrated — Apple, NVIDIA, and Alphabet alone account for roughly 28% of assets — because the algorithm and the research team have both identified large technology names as the likeliest sources of earnings acceleration.

Concentrated into conviction names

Because GROZ holds only 41 stocks, each position is material. The top 10 holdings represent nearly 60% of assets, which is the structure of a conviction portfolio: the managers own what they believe most strongly in and avoid diluting the fund’s returns with secondary picks. This concentration cuts both ways. When the largest holdings perform well, GROZ’s returns compound visibly; when they stumble, the entire fund moves. An investor in GROZ is betting not just on growth equities as a category, but on Zacks’ ability to identify which specific large caps will beat.

The earnings growth thesis

Zacks is fundamentally an earnings-forecast house. The firm’s sell-side analysts and models focus on predicting company earnings surprises — situations where actual results exceed consensus forecasts. GROZ translates that strength into portfolio construction: the fund is designed to own companies that Zacks models suggest will surprise to the upside on profits over the near term. If growth slows and large caps stop beating estimates, the fund’s conceptual edge erodes.

Performance and the growth environment

Since inception in December 2024, GROZ has outpaced the S&P 500 and most broad growth funds. That outperformance, though brief, reflects the fund’s concentrated tilt toward mega-cap technology names at a time when those names have led the market. Whether GROZ can sustain this edge through a full market cycle — particularly if growth slows or sentiment shifts away from technology — is unproven.

Fees and the active-management trade

At 0.55%, GROZ charges roughly ten times what a passive technology or growth fund costs. That fee is modest for an active equity fund but material versus a broad index. The fund must systematically beat its benchmark by at least 0.55 percentage points to justify the cost, a hurdle that most active managers fail to clear consistently.

How to approach this fund

Prospective investors should review Zacks’ current earnings-growth forecasts and see which sectors the models favor. GROZ’s performance is entirely dependent on whether those forecasts prove reliable and whether the fund’s concentrated holdings execute on growth. Checking the quarterly holdings list will show whether the fund’s composition has shifted as estimates have changed — a sign of active management responding to new information. Like any growth-focused fund, GROZ is sensitive to the prevailing appetite for earnings growth; in periods when value or defensive stocks lead, this fund is likely to lag.