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Portfolio construction

Quality matters when investing

February 02, 2024 - 1 min read

A high-quality stock portfolio can help investors weather a range of market conditions, with the potential to benefit in up markets and offer protection during market stress. Gateway’s investment team has developed a disciplined approach for selecting businesses that can withstand full economic cycles and add resiliency to its equity portfolios.

 

Gateway’s Quality Score

With an expertise in quantitatively driven equity portfolio management, the investment team has identified key metrics that indicate strong, quality companies. Gateway’s proprietary process aims to increase a portfolio’s overall Quality Score which is driven by a focus on key fundamental variables. It differs from strategies that rely solely on quantitative rules, static triggers, or algorithms to drive management decisions.

The team enhances the Quality Score of an equity portfolio by identifying opportunities to maximize profitability metrics, such as Return-on-Equity and Cash-Flow-to-Income – and minimize leverage metrics including Debt-to-Assets and Debt-to-Equity. For the Natixis Gateway Quality Income ETF (GQI), this results in an equity portfolio emphasizing the highest quality names from the S&P 500® Index and relative overweights to historically high-quality sectors.

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.

Return on Equity: A measurement for a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Debt-To-Assets: A leverage ratio that defines how much debt a company owns compared to its assets.

S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large cap segment of the US equities market.

ETF General Risk:
Exchange-Traded Funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are not individually redeemable directly with the Fund, and are bought and sold on the secondary market at market price, which may be higher or lower than the ETF's net asset value (NAV). Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns.

Risks:
Unlike typical exchange-traded funds, there are no indexes that the Fund attempts to track or replicate. Thus, the ability of the Fund to achieve its objectives will depend on the effectiveness of the portfolio manager. There is no assurance that the investment process will consistently lead to successful investing.

Investments in Equity-Linked Notes (ELNs) are subject to liquidity risk, which means there may not be an active market for ELNs which would prevent them from being sold at a fair price. Since ELNs are in note form, they are subject to certain debt securities risks, such as credit or counterparty risk. Should the prices of the underlying instruments move in an unexpected manner, the Fund may not achieve the anticipated benefits of an investment in an ELN, and may realize losses, which could be significant and could include the Fund's entire principal investment.

Options may be used for hedging purposes, but also entail risks related to liquidity, market conditions and credit that may increase volatility. The value of the fund's positions in options may fluctuate in response to changes in the value of the underlying asset. Selling call options may limit returns in a rising market.

Equity securities are volatile and can decline significantly in response to broad market and economic conditions.

The Fund is new with a limited operating history.

Before investing, consider the fund’s investment objectives, risks, charges, and expenses. Visit im.natixis.com or call 800-225-5478 for a prospectus or a summary prospectus containing this and other information. Read it carefully.

ALPS Distributors, Inc. is the distributor of the Natixis Gateway Quality Income ETF. Natixis Distribution, LLC is a marketing agent. ALPS Distributors, Inc. is not affiliated with Natixis Distribution, LLC.

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