Q&A with Bancreek's Andrew Skatoff

1. Bancreek recently launched its first ETF – the Bancreek U.S. Large Cap ETF (NYSE Arca: BCUS) in December of last year. What led to your decision to enter the ETF marketplace?

Bancreek was formed with the goal of helping investors compound capital by identifying and investing in companies with structurally advantaged business models. These structural advantages can manifest in various forms, such as having differentiated products or services, ample opportunities to reinvest free cash into growth, exceptional acquisition integration capabilities, and the ability to remain resilient through different economic climates. Our development of a sophisticated quantitative and systematic framework has been instrumental in pinpointing such businesses and constructing diversified portfolios around them.

The growing demand for actively managed ETFs, particularly in the large-cap equity segment, presented a wonderful opportunity for us to bring our proprietary investment methodology to a broader audience. The ETF structure aligns with our mission by seeking tax efficiency, transparency, and liquidity—key attributes that facilitate accessible and effective investment solutions.

The U.S. equity market, with its considerable size and liquidity, was a natural initial focus. We applied our models to the extensive universe of U.S. large-cap equities, which led to the launch of the Bancreek U.S. Large Cap ETF (BCUS). Building on its success and positive investor reception, we expanded our offerings with the Bancreek International Large Cap ETF (BCIL), which we launched back in March of this year.  
 

2. Can you describe what you believe are some key features of Bancreek’s ETFs?

One of the hallmark features of Bancreek’s ETFs is our fully quantitative approach to long-term compounding. While our investment framework is firmly anchored in our extensive experience with fundamental research, we have further refined it by incorporating advanced principles of information theory. This integration has allowed us to construct a systematic framework capable of identifying data patterns that are intricately linked to structurally advantaged business models.

Another key advantage of our data-driven approach is its ability to mitigate the cognitive biases that often lead to suboptimal portfolio management decisions. By leveraging these tools to effectively neutralize human biases, we are able to focus on the continual refinement of our quantitative models. We believe that this iterative process not only enhances the robustness of our stock selection process, but also positions our ETFs to deliver superior, risk-adjusted returns for our investors over the long term.

We believe our current ETFs provide advisors and investors with a systematic alternative to both passive and actively managed large-cap core and growth ETFs available in the market. They are designed to integrate seamlessly into portfolios seeking differentiated equity exposure, offering a proprietary approach to capitalizing on structurally advantageous business models.
 

3. You currently have Domestic and International Large Cap Equity ETFs – what’s next on the horizon for Bancreek?

The beauty of our data-driven framework is its versatility. It’s designed to be adaptable to virtually any segment of the investing universe. Currently, we’re focused on exploring a range of potential ETF offerings within the equity markets. This could mean delving into sector-specific ETFs, targeting specific geographic regions, or even launching low volatility or thematic ETFs.

Looking beyond equities, our framework’s inherent flexibility permits us to explore a wide range of asset classes and investment strategies. We are enthusiastic about these future possibilities and look forward to leveraging our innovative approach in new and diverse investment domains.
 

4. Do you think recent advancements and trends in AI technology will impact the investment management industry and how are you looking to position yourself in this rapidly evolving space?

The technology behind AI has been around for quite a while, although it’s evolved from its earlier, more rudimentary forms. What truly matters is how effectively AI is used, and that often depends on the expertise of the people or organizations applying these tools. There’s a vast amount of data available—some of it incredibly valuable, some of it more noise than anything else—which can significantly impact the performance of AI systems.

At Bancreek, we’re not just focused on amassing data; we’re dedicated to minimizing the noise and disruption within that data to enhance our investment decisions. Our goal is to continuously refine our internal systems and toolsets. If incorporating advanced AI capabilities can further optimize our processes, we are committed to exploring and integrating these technologies to enhance our strategic objectives and investment outcomes.
 

5. What do you believe are some key considerations that investors should be aware of when considering actively managed ETFs?

When evaluating actively managed ETFs, there are several critical factors investors should consider:

Strategy Evaluation: To begin with, investors need to assess whether the ETF’s strategy makes sense. It’s important to understand the underlying investment approach and determine if it aligns with their expectations and goals. Does the strategy address current market conditions effectively and provide a clear path to potential returns?

Investment Philosophy: Examine the consistency and repeatability of the active manager’s investment philosophy. A robust methodology ensures that decisions are guided by a structured, disciplined process rather than sporadic or reactive measures.

Objective Alignment: Investors should reflect on their own objectives and whether an actively managed ETF supports those goals. Consider how the ETF fits within your broader investment strategy—does it complement your existing holdings, and does it help you achieve specific financial targets or risk profiles?
 

6. Lastly, what guidance would you provide sponsors that are considering expanding their product lineup to include actively managed ETFs?

Sponsors contemplating the inclusion of actively managed ETFs in their product lineup should first ascertain whether there is a genuine market need or gap for their proposed investment strategy. Introducing a product that merely represents a variation of existing offerings may struggle to differentiate itself. Instead, focus on providing a unique value proposition or addressing an unmet market need.

Additionally, it is crucial to conduct comprehensive due diligence on the ETF ecosystem. This includes understanding the various components involved in launching and managing an ETF. Evaluate which capabilities your organization can handle internally versus those requiring external partnerships. This will help you gauge the costs, feasibility, and practicality of establishing and operating an ETF business.

Source: NYSE, August 22, 2024

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Funds, please call (855) 973-7880 or visit our website at www.bancreeketfs.com. Read the prospectus or summary prospectus carefully before investing.

The Funds are distributed by Foreside Fund Services, LLC.

Investing involves risk, including loss of principal. A new or smaller fund’s performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. The Funds rely heavily on proprietary quantitative investment selection models as well as data and information supplied by third parties that are utilized by such models. To the extent the models do not perform as designed or as intended, the Funds’ strategies may not be successfully implemented and the Funds may lose value. If the models or data are incorrect or incomplete, any decisions made in reliance thereon may lead to the inclusion or exclusion of securities that would have been excluded or included had the models or data been correct and complete. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Artificial Intelligence does not guarantee a profit or protect against a loss. Read the prospectus for each Fund for additional details regarding risks.