Bristol Gate formula comes to ETFs

the highest dividend growth for the upcoming 12 months. Over the past year, the U.S. strategy posted an 18.9-percent growth in dividends.

On all three measures, growth in sales, cash flow and dividends, Bristol Gate’s equally weighted portfolio, rebalanced each quarter, is in the top 10 per cent of all funds. But rising dividends is not a natural outcome: 34 per cent of the members of the S&P 500 have cut dividends over the past 23 years.

Now the singularly-focused firm, whose U.S. strategy had only been available to accredited investors, and whose two co-chief investment officers are Peter Simmie and Reyer Barel, is taking the next step in its development.

This week it launched two actively managed ETFs, one based in its U.S. strategy and the other based on a Canadian strategy that uses the same methodology as the U.S. strategy. In this way, investment advisers and their clients will have better access to investment strategies like Bristol Gate’s.

“Our objective has always been to identify opportunities that can support our investors’ portfolios through capital growth and by providing them more income in the future as well,” said founder Richard Hamm in an interview.

Hamm stressed the two ETFs will be actively managed. “We will be combining the firm’s skills in data science and fundamental analysis. We won’t be using a rules-based passive model.”

And Bristol Gate is not embarking on this new development blind: it does have a track record for both its U.S. and Canadian strategies.

In July 2013, it put its own money into the Canadian strategy and since then has been managing the fund using the methodology that will be used for the Canadian ETF.

Performance has been stellar: according to Global Investment Performance Standards (GIPS) verified numbers, that real money has generated a 13.7-per-cent annual compound rate of return or 440 basis points above the TSX’s return over the same period. (Those numbers are gross of fees.) The Canadian fund, which is underweight the financial and energy sectors, is home to 25 stocks.