An ETF launch which has grabbed my attention is a long-standing strategy that has flown under the radar since arrival in Europe, despite giving the S&P 500 a run for its money and awarding less than 4.5% of its basket to the prominent ‘magnificent seven’.

In January, ETF Stream revealed the launch of the VanEck Morningstar US Wide Moat UCITS ETF (MOTU), providing a UCITS equivalent to a $16.3bn ’40-Act’ ETF with a unique twist on US equity exposure.

While US mega cap dominance in 2024 has meant modest early uptake for MOTU – with $54m assets under management (AUM) as at 13 December – European investors might be unfamiliar with the track record of the ETF’s US-listed equivalent, which has beaten the S&P 500 since inception.

In fact, while the SPDR S&P 500 ETF (SPY) has booked impressive gains of 341% since May 2012, ’40-Act’ MOAT boasts a 379.9% return over the same time span.

Chart 1: MOAT vs SPY

Source: Google Finance

Performance is only one factor, however. Another calling card for MOTU is its use case from a portfolio construction perspective.

While the chart above indicates a relatively high correlation to SPY, VanEck’s US moat strategy awards its top sector allocations to industrials and healthcare – at 23.4% and 21.3% respectively – while awarding 17.9% to information technology, well shy of the sector’s 31.3% share of the S&P 500.

Equally, MOTU allocates 78.6% to large cap and 21.3% to mid-cap companies, meaning investors are not making a tactical call on smaller companies while capturing just three of the ‘magnificent seven’ names which will already dominate portfolios – with Amazon, Alphabet and Microsoft awarded less than 1.5% apiece.

Looking under the bonnet, MOTU provides what might be understood as an inventive take on quality factor exposure, tracking the Morningstar Wide Moat Focus index of 54 companies with ‘economic moats’.

The concept, first coined by Warren Buffett, is implemented by Morningstar equity analysts identifying companies benefitting from cost leadership, economies of scale, network effects and intangible assets such as brand strength and high switching costs for users.

MOTU has the added benefit of tracking the ‘focus’ iteration of Morningstar’s moat index series. While this more than halves the number of holdings from 139 in the suite’s parent benchmark, the ‘focus’ benchmark has outperformed since inception.

While investors might rightly call into question to quasi-active nature of qualitative judgements on companies’ competitive edge, MOTU undoubtedly offers a creative take on the market in vogue this year.

Its arrival joins other recent efforts to slice US equities this year, including the Pacer US Cash Cows 100 UCITS ETF (COWZ), iShares S&P 500 Top 20 UCITS ETF (SP20), Amundi MSCI USA Ex Mega Cap UCITS ETF (XMGA) and even ETFs offering the reverse angle including the Xtrackers MSCI World ex USA UCITS ETF (EXUS).