The fund tracks the Victory US Large Cap Free Cash Flow Index, which picks stocks with high free cash flow yields from a pool of US large caps. Among companies that pass a profitability screen, it selects those with superior cash generation.

It suits investors who combine value and growth approaches and who prioritize a company's cash generation and qualitative strength over simple high dividends.

The ETF is run with an active (actively managed) approach by Victory Capital.

From the large-cap universe, candidates are first filtered by profitability criteria. The fund then selects stocks with strong free cash flow yields and high growth indicators and allocates weights among them. The index is reconstituted and rebalanced every quarter, so changes in cash generation are reflected periodically.

• Uses free cash flow yield, rather than dividends, as the core selection criterion
• Takes a qualitative factor approach that combines a profitability screen with growth indicators

Assets under management (AUM) stand at $12.4B, and the total expense ratio is 0.39% per year.

Unlike traditional dividend ETFs, it uses cash generation itself, not whether a dividend is paid, as the selection criterion, which differentiates its holdings.

The free cash flow factor tends to perform differently between value and growth stocks depending on the market phase, and short-term returns are affected by interest rates and the earnings season. It is more appropriate to understand the characteristics of the factor than to assume strength in any particular period.

As the free cash flow theme draws attention, interest in related ETFs appears to be continuing. However, fund flows fluctuate with the market environment and shifts in factor preferences, so they may differ from one period to another.

Its strength is qualitative selection centered on cash generation, while a drawback is that, given its active factor nature, its fee is somewhat higher than that of broad core ETFs.

SCHD and VYM shown in the table are leading dividend ETFs that screen stocks mainly by dividend yield, so their approach differs from VFLO, which uses free cash flow as its selection criterion. VIG focuses on a history of dividend growth. Direct substitutes within the same free cash flow theme include COWZ, which targets US large caps, and its small-cap counterpart CALF, both of which are worth comparing.

Here are the points to review before investing in VFLO. Checking the characteristics of the free cash flow factor, the fee level, the concentration of selected stocks, and the impact of exchange rates in advance can help you judge whether it fits your investment goals.

Note that the relative performance of the free cash flow factor can vary with the market phase, and that because the number of selected stocks is limited, moves in individual stocks have a large effect on the whole fund.

It is a suitable choice for investors who want qualitative selection based on a company's cash generation rather than simple high dividends. To compare the same free cash flow theme, consider COWZ and CALF together, and if you prefer a dividend-focused approach, consider SCHD and VYM as well.