Jensen Launches JQTY ETF With a Strict 10-Year Profitability Test

How JQTY Selects and Weights Quality Companies

To qualify for the index, a company must have generated a return on equity (ROE) of at least 15% in each of the past 10 consecutive fiscal years.

According to Jensen, fewer than 315 U.S. companies currently meet that standard.

The screen reflects a philosophy the firm has followed since its founding in 1988: focus on businesses with sustainable competitive advantages and persistent profitability, rather than companies benefiting from a single strong year.

From that qualifying universe, the index selects the 100 largest companies by market capitalization.

Those stocks are then weighted using a modified market-capitalization approach designed to reduce concentration and limit the influence of the very largest names.

The index is reconstituted and rebalanced twice a year.

Under normal circumstances, JQTY invests at least 80% of its net assets in these "Quality Companies."

Jensen expects the fund's performance, before fees and expenses, to maintain a correlation of at least 95% with the index over time.

As an index fund, JQTY simply follows its benchmark. It does not attempt to outperform the index or shift into defensive positions when markets decline.

Where JQTY Could Fit in a Portfolio

Jensen sees several potential roles for the new ETF.

JQTY can serve as a core U.S. large-cap equity allocation for investors looking for companies with sustained profitability. It can also sit alongside broader equity exposure as a dedicated quality allocation.

"A single strong year doesn't tell you whether a business is built to last," said Allen Bond, Managing Director, Head of Research & Portfolio Manager at Jensen Investment Management. "For over 35 years, we've identified companies that can compound shareholder value across economic cycles. The Jensen U.S. Quality Universe ETF allows investors direct access to this philosophy, through a straightforward, rules-based investment product."

About Jensen Investment Management

Jensen Investment Management, Inc. is an independent, boutique investment manager founded in 1988 and located in the metro area of Portland, Oregon. Since its inception, Jensen has managed high-quality equity portfolios focused on the long-term ownership of companies with sustainable competitive advantages; persistent, strong business performance, as measured by return on equity (ROE); and attractive growth prospects. Jensen is the advisor to three mutual funds and two exchange traded funds and manages separate accounts for high-net-worth individuals and institutional and registered investment advisor (RIA) clients. Jensen's ETF suite includes the Jensen Quality Growth ETF

For more information, visit jenseninvestment.com.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.