With the S&P 500 Index pushing to new highs, many advisors are confronting a familiar challenge: how to maintain equity exposure without taking on unnecessary valuation risk. In a recent webcast, AI, Valuations, and Concentration Risks: Why Free Cash Flow Matters More Than Ever, Victory Capital client portfolio manager Michael Mack made the case for why free cash flow (FCF) has become one of the most effective tools for identifying durable, high-quality opportunities in today's market. During the discussion ...

FCF's Influence on Growth The start of the webinar highlighted a historical account on the dominance of growth and value, which tends to come in cycles. Attendees were asked how they allocated to both factors, which resulted in a relatively balanced outcome — 23% towards growth and 15% to value in today's market. "I congratulate our audience on having a healthy growth allocation because that's been beneficial over time,†Mack said upon seeing the results, mentioning that the resilience of growth over time ca ...

Core Insights - The S&P 500 has reached multiple record highs, leading to investor concerns about whether valuations have peaked and if it is the right time to invest new capital [1] - Victory Capital emphasizes the importance of free cash flow (FCF) as a metric to identify high-quality businesses in elevated-valuation markets [1][2] Free Cash Flow ETFs - Victory Capital has launched a suite of ETFs focused on FCF, including the flagship VictoryShares Free Cash Flow ETF (VFLO), which tracks the Victory U.S. Large Cap Free Cash Flow Index [2] - The VFLO Index targets high-quality, large-cap companies with attractive valuations and solid growth prospects [2][12] Valuation Risks - Current market conditions present valuation risks, with stock prices showing a disconnect from fundamental metrics [3] - Investors are encouraged to mitigate valuation risks by investing in stocks with high free cash flow [3] Growth Factor and FCF - Research indicates that combining growth with FCF can enhance investment effectiveness [4] - The VictoryShares Free Cash Flow Growth ETF (GFLW) provides exposure to U.S. companies with high FCF profitability and growth potential [3][4] International Opportunities - With the dollar's weakness and other macroeconomic factors, investors are increasingly looking at international equities [5] - Victory Capital has introduced the VictoryShares International Free Cash Flow ETF (IFLO) and the VictoryShares International Free Cash Flow Growth ETF (GRIN) to expand access to high-quality, high FCF companies globally [5][6] Diversification Strategy - The suite of FCF ETFs allows investors to build a diversified portfolio, including small-cap exposure through the VictoryShares Small Cap Free Cash Flow ETF (SFLO) [6] - Research supports the appeal of FCF across various regions and asset classes, promoting a diversified investment approach based on FCF [7]