Why FPA Global Equity ETF (FPAG) Stands Out in a Volatile Market Environment

In an era of market turbulence, where global economic uncertainties and shifting investor sentiment create unpredictable swings, the value of active management has never been more critical. While passive strategies offer simplicity and low costs, they often lack the agility to adapt to rapidly changing conditions. Enter the FPA Global Equity ETF (FPAG), a fund that leverages a disciplined, quality-focused active strategy to deliver resilient, above-benchmark returns. By prioritizing compounders, maintaining a fully invested approach, and relying on seasoned management, FPAG has carved a unique niche for itself in volatile markets.

The Power of Compounders in Active Management

FPAG's core philosophy centers on identifying and holding “compounders”—companies with durable competitive advantages, strong balance sheets, and management teams committed to long-term value creation. These firms are not just high-growth darlings or short-term fads; they are industry leaders capable of reinvesting profits into sustainable growth. By focusing on such businesses, FPAG avoids the pitfalls of speculative investing while positioning itself to capitalize on compounding returns over time.

For example, the fund's overweight position in Meta Platforms (META)—a prime example of a compounding business—has paid dividends in a communication services sector that has outperformed broader markets. Meanwhile, its underweight in technology (excluding speculative growth stocks like NVIDIA) has shielded it from overexposure during tech sector corrections. This selective approach ensures the portfolio remains aligned with companies that can thrive in both value-led and growth-led environments.

Full Investment and Sector Tilts: A Double-Edged Sword

Unlike many ETFs that maintain cash buffers to hedge against volatility, FPAG is fully invested, with less than 5% in cash. This strategy amplifies returns during market upturns but also increases exposure during downturns. As of early 2025, FPAG has captured 104–106% of the MSCI benchmarks' losses during market corrections, a trade-off that reflects its active, all-in approach. However, the fund's sector tilts—such as its 16% overweight in communication services and 12% underweight in technology—have historically offset some of this risk by concentrating capital in high-conviction areas.

This full-investment model is particularly effective in volatile markets because it avoids the drag of underperforming cash holdings. Instead, FPAG's managers actively rotate positions to maintain exposure to its best ideas. For instance, during the 2023–2024 market rotation from growth to value, FPAG's value-oriented tilt allowed it to outperform its benchmarks by several percentage points.

Seasoned Management and a Repeatable Process

The fund's success is underpinned by its management team: Brian Selmo and Mark Landecker, who bring decades of experience from their prior co-management of the FPA Crescent fund. While their tenure with FPAG is relatively short (since 2021), their track record with FPA Crescent—a fund with a 20-year history of outperforming its benchmark—provides confidence in their ability to navigate volatile markets.

FPA's investment process is also a key differentiator. The firm's focus on shareholder-centric companies—those with strong governance, consistent earnings, and a history of returning capital to investors—ensures that FPAG's portfolio remains disciplined and resilient. This approach has allowed the fund to maintain a Morningstar Silver Medalist Rating, a testament to its robust investment framework.

A Balanced Approach for Uncertain Times

FPAG's strategy is not without risks. Its higher volatility—15–20% greater than its benchmarks—makes it unsuitable for risk-averse investors. However, for those seeking a fund that can deliver consistent outperformance in both rising and falling markets, FPAG's active management model offers a compelling case. By avoiding deep-value traps and speculative growth stocks, it strikes a balance between growth and quality, a rare combination in today's market.

Final Thoughts: A Case for Active Resilience

In a world where market cycles are increasingly erratic, FPAG's active management framework provides a roadmap for navigating uncertainty. Its focus on compounders, full investment, and seasoned leadership creates a portfolio that is both disciplined and adaptable. While it may not be the lowest-risk option, its ability to outperform in diverse market environments makes it a standout choice for investors prioritizing long-term growth over short-term stability.

For those willing to accept higher volatility in exchange for the potential of above-benchmark returns, FPAG offers a compelling case. In volatile markets, active management isn't just valuable—it's essential. And FPAG, with its unique blend of quality, strategy, and experience, is a prime example of how it can work.