St. Louis RIA bets on faster trading with Longview Advantage ETF

St. Louis-based RIA Hill Investment Group is leaning on a faster trading strategy to distinguish its Longview Advantage ETF from funds run by larger asset managers, chief investment officer Matt Zenz told InvestmentNews.

“One of the main drivers of why we think we'll do better than these firms is that we're not bloated, we're not slow, and we can buy these stocks within days, rather than within quarters,” said Zenz.

Hill Investment Group maintains an evidence-based investing strategy - a strategy shared by firms such as Dimensional Fund Advisors, where Zenz worked as a portfolio manager for four years before he joined Hill in 2021. The Longview Advantage ETF (ticker: EBI) launched in February with about $440 million AUM and has now reached $520 million. Zenz managed over $70 billion in client assets at Dimensional, which has nearly $800 billion total AUM.

“This type of systematic evidence-based philosophy, we noticed partially because I used to do this at my old job, that it took these firms three months to two years to buy and sell these stocks,” said Zenz. “The reason it takes them two years is because they're so big and they have to slowly buy it over time, otherwise they're going to push markets, which we don't want them to do either.”

The EBI ETF currently has 14 institutional owners and about half of its assets come from Hill Investment Group. The RIA serves roughly 300 clients with $1.1 billion in AUM. Zenz positions EBI as a “US total stock market solution;” its top holdings include NVIDIA at roughly 5.6% allocation, Microsoft at 4.9% and Apple at 3.86%.

 “We want to have more money in small value and less in large growth,” said Zenz. “There are periods of time when valuations get pretty extreme. Large growth companies are priced very highly, and small value companies are priced very cheaply. What we've seen in the data is when that happens, small value companies tend to do better, there seems to be some mean reversion there.”

Hill Investment Group was founded in 2005 by Rick Hill and Matt Hall, who is the firm’s CEO. In 2021, Hill became a partner firm under Focus Financial Partners. “If capacity constraints for huge firms are part of the issue, we want to be super sensitive to how we manage capacity in a smaller strategy ourselves,” Hall said. “We're not looking for 1000s of firms to know what we're doing, but 20 to 30 firms who really understand this approach, that's where our target is.” 

EBI has an expense ratio of 0.25%, or 25 basis points. EBI leverages Section 351 of the Internal Revenue Services code to allow its investors to transfer their stock holdings into the ETF while avoiding a capital gains tax. 

 “It allows firms to bring one of the best tax investment solutions to their clients that's out there,” Zenz said of the 351 conversion. “You can go from a concentrated stock position to a diversified low cost, tax efficient solution, without paying any taxes, without paying any fees.”