How does the MDCP ETF work?

In the dynamic world of finance, Exchange-Traded Funds (ETFs) have become increasingly popular among investors. These financial instruments offer a diverse range of investment opportunities, and one such ETF is the MDCP ETF. In this article, we will delve into the MDCP ETF, providing an overview, insights into its underlying assets, benefits of investing in it, and considerations before making the leap into this financial instrument.

MDCP ETF: Overview

The MDCP ETF, short for Mid-Cap Equity Exchange-Traded Fund, is designed to pursue specific investment objectives by focusing on mid-cap companies. To achieve this objective, the fund invests at least 80% of its assets in equity securities of mid-cap companies. But what exactly defines a mid-cap company in this context? The MDCP ETF considers mid-cap companies as those with market capitalizations within the range of companies comprising the Russell Mid Cap Index.
Russell Mid Cap Index included companies with approximate market capitalizations ranging from $0.7 billion to $46.8 billion. It's essential to note that the composition of this index can change with market conditions, influencing the fund's holdings. Generally, the MDCP ETF aims to hold approximately 30 securities in its portfolio.

MDCP ETF Underlying and Exposure: What Does It Track and How?

To understand the MDCP ETF better, it's crucial to examine its investment process. The fund employs a bottom-up, fundamental research approach that integrates an analysis of a company's Environmental, Social, and Governance (ESG) factors. This approach helps identify high-quality companies believed to have sustainable growth potential while trading below their intrinsic value.
The investment universe is narrowed down from approximately 800 companies to about 200 through multifactor fundamental screening. From there, the selection process further narrows the potential investments to a watchlist of around 50 companies, using both quantitative and qualitative criteria. These criteria help identify factors that are expected to increase the value of the company's securities, such as rising cash flows or increasing revenues.
To select the final portfolio, the portfolio management team seeks securities with the highest adjusted return, calculated using their proprietary Quality Assessment and risk measures for each security. The Quality Assessment takes into account various factors, including management quality, financial strength, industry position, and ESG ratings determined by the team's proprietary methodology.
The ESG rating methodology applied by the Adviser considers 16 main categories across three ESG pillars: Environment, Social, and Governance. This methodology weighs ESG factors based on their materiality within a specific industry. The resulting weighted factors contribute to an overall ESG rating for each company, determined by a rules-based formula.
The MDCP ETF may even invest in companies with below-average ESG ratings if the Adviser identifies corrective actions being taken to improve ESG performance. The investment team actively engages with the company's management to drive positive change in ESG factors.
Additionally, the MDCP ETF follows a policy of not investing in entities directly involved in the primary manufacture of tobacco products, cluster munitions, thermal coal, and fossil fuels. The fund also maintains its overall Carbon Risk at or below the level of a third-party index comprised of large- and mid-cap segments of the U.S. and Canadian markets that exclude companies with the highest carbon emissions intensity and the largest owners of carbon reserves per dollar of market capitalization.

MDCP overlap How does work the MDCP ETF?

MDCP ETF: Benefits to Invest In

Investors may find several compelling reasons to consider the MDCP ETF as part of their investment strategy. The fund's focus on mid-cap companies can offer a balance between potential growth and risk. By utilizing a comprehensive investment process that includes ESG factors, it seeks to identify companies with strong growth prospects while considering their social and environmental impact.
Furthermore, the MDCP ETF's active engagement with companies to improve ESG performance demonstrates a commitment to responsible investing. This approach aligns with the belief that high-quality companies with good corporate citizenship can create long-term shareholder value.

MDCP ETF: Considerations Before Investing

While the MDCP ETF offers an intriguing investment opportunity, it's essential for investors to consider a few factors before diving in. As with any investment, risk is inherent, and market conditions can change. Investors should assess their risk tolerance and financial goals to determine if the MDCP ETF aligns with their investment strategy.
Additionally, it's crucial to keep an eye on the fund's portfolio composition, as it may change over time based on market conditions. Staying informed about the companies held within the fund and their performance can help investors make informed decisions.

Conclusion

In conclusion, the MDCP ETF presents an attractive investment option for those seeking exposure to mid-cap companies with a focus on ESG factors. However, investors should perform their due diligence and consider their own financial circumstances and objectives before investing.

Disclaimer: This article is for informational purposes only and does not provide investment advisory services."

MDCP ETF issuer
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