This Transformative ETF Just Got 5-Stars on Morningstar

We focus mainly here at AAM on income-generating solutions, but we know how important it is to have growth strategies as well and the role they play in a diverse asset allocation model. We're excited to talk about Transformers and the fact that, as you alluded to, just a few days ago, after three years of a track record of live performance, it has been awarded a five-star rating by Morningstar. The performance has been exceptional.

Through October 31st, TRFM is up nearly 34% year-to-date, and more impressively, it has returned over 31% on an annualized basis over the last three years. Now, you may be saying that most likely you are capturing that alpha through Mag 7 exposure. Many large-cap growth strategies have a 40 to 50 or even 60% allocation to the Mag 7 exposure, and I will say that is not the case with Transformers.

One of the major talking points around TRFM is the fact that it does not have that much Mag 7 exposure. In fact, it's right around 6%. There are over 200 holdings in Transformers, and that's what makes the performance quite honestly astounding, is that we are able to return that without having a tremendous amount of Mag 7 exposure. So the question becomes, how does TRFM achieve that?

I will start off by saying TRFM is a rules-based strategy. Its underlying index is the PENCE Transformers Index. This is an index that really focuses on R&D, capex, and sales growth. In doing so, the goal of TRFM is to identify those big or brilliant companies that are transforming the world around us. We say big or brilliant because if you're big, you are generally spending a lot of money on R&D and coming up with something exceptional.

If you're brilliant, you have a very good concept or a product, and then you get bigger and bigger and bigger. What we are trying to do through our rules-based index is trying to capture those arenas, and luckily, we've been able to do that. The performance has been fantastic. Lastly, I will say this: Transformers is not a domestic-only strategy. If you invested in the S&P 500 or Q's, you are essentially omitting a large arena of international equities that provide a lot of growth opportunity.