An ETF focused on the 'moats' strategy of Warren Buffett is beating the market once again

Published Fri, Jun 16 20231:35 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

An exchange traded fund built on an investing strategy popularized by Warren Buffett is proving its worth once again in 2023. The VanEck Morningstar Wide Moat ETF (MOAT) has a total return of more than 23% year to date, according to FactSet, handily beating the S & P 500 and enhancing an already stellar long-term track record. The ETF is an equal weight fund designed to track shares of companies with economic "moats" that are trading cheaply based on expected future cash flows, as determined by Morningstar analysts, explained Brandon Rakszawski, a vice president and director of product management at VanEck. "They go through this process, in both a qualitative and quantitative manner, to determine which of these companies that they cover have an identifiable competitive advantage. That's what they consider an economic moat — essentially a fortress around their business to protect from competition entering the market," Rakszawski said. The strategy has proved be both a short and long-term winner. MOAT has outperformed the SPDR S & P 500 Trust (SPY) on a 5-year and 10-year basis as well, even accounting for its 0.46% expense ratio. MOAT 5Y mountain The VanEck Morningstar Wide Moat ETF has been a long-term outperformer. The fund's current holdings include Amazon , Adobe and Medtronic . MOAT was also one of the top 10 ETS by inflows this week, according to FactSet, but its $1.6 billion of inflow was largely mechanical change as a result of a recent index rebalance, said Rakszawski. ETF rebalances can result in a large inflow followed by a large outflow as fund managers look to change the portfolio in the most tax-efficient way, Rakszawski said. But the fund has still brought in an additional $500 million over the past month and about $1.5 billion year, suggesting that some investors are catching on to its track record. "It's been a pretty attractive and high demand strategy of ours this year," Rakszawski said. Elsewhere, Elsewhere, investors appeared to be interested in a broad variety of equity funds this past week. The Vanguard Value ETF (VTV) and iShares Core S & P 500 ETF (IVV) were the top two funds of the week, each bringing in more than $2 billion. Here are some other notable data points from ETFs this week: Even though broad equity funds have seen demand in recent weeks, the SPY saw more than $7 billion in outflows last week. Because the SPY is often used as a trading vehicle, the outflows could be partially due to a some large traders unwinding short bets against the broader market. Several large short-term bond funds saw outflows this week, including Vanguard Short-Term Bond ETF (BSV) . That could be a sign that investors are betting the Federal Reserve is done hiking rates.