Unpacking the Meteoric Rise of VFLO

In a recent episode of Behind the Ticker, host Brad Roth sat down with Mannik Dhillon, President of Investment Franchises and Solutions and Head of ETFs at Victory Capital, to discuss the remarkable growth of VFLO, the Victory Shares Free Cash Flow ETF. Dhillon shared his journey from pre-med to institutional manager research to Victory’s C-suite, explaining how the firm’s multi-boutique model fosters genuine specialization and reduces groupthink.

This approach, Dhillon argued, allowed Victory’s solutions team to identify a gap in the crowded free-cash-flow-yield space and create a better solution. The team’s innovative approach has been instrumental in VFLO’s success, which has seen the fund grow to over $10 billion in assets in just over three years.

What Makes VFLO Different?

So, what sets VFLO apart from other value funds? According to Dhillon, two key factors contribute to its success: it looks forward instead of just backward by incorporating estimated free cash flow, and it layers in a growth filter that ruthlessly cuts the worst performers to avoid classic value traps.

This combination has helped VFLO outperform not just value benchmarks but also core and growth benchmarks, all while maintaining zero exposure to the Magnificent Seven. The result is a fund that has achieved the seemingly impossible for a value fund: outperforming its peers.

The Power of Simplicity and Cross-Selling

Dhillon credits the fund’s simplicity, a well-trained sales force, strong marketing, and cross-selling from Victory’s broader lineup for turning a sound methodology into real adoption. The same framework now powers SFLO (small cap), GFLW (large growth), and international siblings IFLO and GRIN, with more variations potentially on the way.

By pairing these different funds, investors can diversify away from mega-cap concentration in the S&P 500 or Nasdaq-100 while still keeping pace in growth-led markets. This approach keeps investors committed to value, even in challenging environments.

A Strategy for Success

Victory Capital’s multi-boutique model has been instrumental in the success of VFLO and its sister funds. By fostering genuine specialization and reducing groupthink, the firm has created an environment where innovative approaches can thrive.

As Dhillon noted, the firm’s strategy doesn’t stop at large-cap value. Instead, it has expanded to small-cap, large growth, and international markets, offering investors a range of options to suit their needs.

The success of VFLO and its sister funds demonstrates the power of innovation and specialization in the investment world. By taking a forward-thinking approach and layering in a growth filter, Victory Capital has created a range of funds that are outperforming their peers.