This is an actively managed quality growth ETF that starts from the entire US stock market and selects stocks using quantitative scores. It ranks companies by profitability, growth and debt-servicing ability together, then holds them in proportion to market capitalization. It does not replicate any specific index.

It suits investors who want exposure to US large-cap growth stocks, but with a portfolio that screens out unprofitable companies and financially weak names.

The ETF is run with an active management approach by Exchange Traded Concepts.

From the universe of US-listed stocks, it first excludes micro-caps, illiquid names and stocks with weak momentum. The remaining stocks are scored on profitability, growth and the ability to cover financing costs. Only the top-ranked names are kept, and they are held in proportion to market capitalization. Individual stocks are subject to a weight cap at the time of purchase.

• An active structure that selects stocks directly through quantitative scores rather than replicating an index
• A first-stage filter that excludes micro-caps and illiquid stocks in advance
• A weight cap at purchase that limits concentration in any single stock

Assets under management (AUM) stand at $59.3M, and the Expense Ratio is an annual 0.55%.

Compared with large quality products that have heavy trading volume, bid-ask spreads may be wider, so staggered purchases and limit orders are ways to reduce the effective cost.

Growth strategies that put earnings quality first have tended to hold up relatively well in periods of high earnings visibility. Conversely, they can lag when unprofitable growth stocks lead the market. Given its sector tilt, the direction of healthcare and information technology has a large influence on performance.

Demand for core-replacement products has been steadily flowing into the quality factor category as a whole. However, assets tend to concentrate in large, low-cost products, so smaller active products may see slower inflows. Interest rates and earnings seasons are the variables that sway the direction of flows.

Its strength is securing earnings quality through quantitative selection, while its weaknesses are its small size, cost burden and the performance dispersion typical of active management.

QUAL ETF, SPHQ ETF and JQUA ETF, shown in the table, are large products that hold the same quality factor on a rules-based basis, with lower fees and far greater assets under management. QGRW ETF, which leans more toward growth, and DGRW ETF, which combines dividend growth, are also useful comparisons in terms of character. For broader pure growth exposure, you could consider large growth ETFs such as SCHG or VUG, and MTUM if you want to add a momentum axis.

These are the items to check before investing in this ETF. With active quality products, you need to look at fees, trading costs and sector tilt together to gauge the real performance gap. Because this is a small product, execution costs are also worth checking.

If the active selection goes wrong, the fund will lag broad growth indexes. Because of its small size, spread costs can eat into returns, and drawdowns deepen when its two main sectors correct at the same time.

If you want US growth stock exposure with an emphasis on earnings quality, it is worth considering as a supplementary position. If cost is your priority, compare QUAL ETF or SPHQ ETF, and if you want stronger growth, compare QGRW ETF.