NEW YORK (MainStreet) — Kevin O’Leary isn’t one to keep his fortune shoved under a mattress. When he’s not busy investing in entrepreneurs on the set of ABC’s "Shark Tank," Mr. Wonderful is looking for ways to put his money to work in the stock market. O’Leary’s investment philosophy, passed down from his mother, is simple: “In cash I trust. If [an investment] doesn’t generate cash I’m not interested.”
In keeping with this risk-averse strategy, O’Leary partnered with Connor O’Brien to form O’Shares, a line of five exchange traded funds, or ETFs, the first of which began trading today on the NYSE Arca as O’Shares FTSE US Quality Dividend ETF (OUSA). The investment ensemble aims to give investors cost-efficient access to a diverse portfolio of low-volatility, high-yield stocks. “When I was young [my mother] said to me, ‘Never buy a stock that doesn’t pay a dividend,’” O’Leary said. “And she killed it. She was right. She wasn’t a portfolio manager, she was just really smart.” O’Leary and O’Brien also co-founded O’Leary Funds, an investment fund manager focused on income, capital appreciation and wealth preservation that has grown to approximately $900 million in assets under management.
“The first fund, ticker OUSA, is designed to be the core equity portion and income generating equity portion of a portfolio for anyone who is a conservative long-term investor who wants more income and less risk,” said O’Brien, CEO of O’Shares. OUSA will track the performance of the FTSE US Qual / Vol / Yield Factor 5% Capped Index (FUSYQVCF). The 140 stocks in the index are selected from the FTSE USA Index and have an average weighted market capitalization of $56 billion and a minimum market capitalization of over $750 Million. The stocks are diversified across ten industry sectors, with the three largest sectors being consumer goods, health care and technology, and the three smallest being materials, financials and utilities.
“Anytime we talk about dividend-oriented equity ETFs, we’re talking about this sort of hybrid space that exists between active and passive, what others call smart beta and what we call strategic beta,” said Ben Johnson, director of global ETF research at Morningstar.
Johnson divides dividend-oriented ETFs into two camps: yielders and growers. “Growers tend to look for growth and sustainability,” he said. "They look for a track record of steady and oftentimes rising dividends, whereas yielders tend to just focus on yield.”