As U.S. equity valuations continue to stretch and concentration risk in major indexes rises, financial advisors face mounting pressure to find efficient ways to diversify their clients’ portfolios internationally. The challenge lies not just in selecting international exposure but in identifying high-quality companies amid a vast and often under-researched universe of stocks. Bancreek Capital Advisors’ International Large Cap ETF (ticker: BCIL) aims to solve both challenges with its systematic approach to stock selection.
In an interview with The Wealth Advisor’s Scott Martin, Eric Pachman, Chief Analytics Officer of Bancreek, discussed how BCIL uses proprietary technology to identify top companies exhibiting strong institutional endurance across global markets, helping advisors access high-quality international companies through a concentrated yet diversified exchange-traded fund (ETF) portfolio of 30 stocks.
Valuation Spread Creates Opportunity
The valuation gap between U.S. and international markets has widened significantly since the COVID-19 pandemic, creating what could be a compelling opportunity for advisors to access quality international companies at attractive valuations. As Pachman notes, before COVID-19, U.S. markets traditionally traded at a two to three multiple premium to international markets. By the end of 2024, that spread had expanded to eight turns.
“The international market at the end of 2024 was cheaper than it was in 2016,” he adds. “So, if you’re looking for great companies at a fair valuation, they’re out there in international equities.”
The structural challenge for advisors stems from the diffuse nature of international indices. While the S&P 500 has become increasingly concentrated in mega-cap technology names, international benchmarks typically spread exposure across thousands of companies. BCIL’s active management approach, powered by proprietary analytics, enables the strategy to identify and invest in only the highest-quality companies from the international universe, ensuring investors gain targeted exposure to companies with the strongest endurance characteristics rather than diluted exposure to thousands of potentially lower-quality names.
A Systematic Approach to Stock Selection
At the heart of BCIL’s methodology is what Pachman calls its “smartwatch for stocks”—a systematic approach to identifying companies with high institutional endurance—the habits and systems that create sustainable, long-lasting performance. Just as athletes’ routines shape their performance, companies develop organizational patterns through their management practices, corporate culture, and operational decisions.
“A smartwatch can figure out some of your vital metrics and project what your endurance could be with decent accuracy. We can do that with stocks as well, which expands our breadth,” Pachman explains. “Rather than a fundamentals-based analysis, which might cover only a handful of stocks, our approach allows us to assess thousands of stocks.”
The firm developed its smartwatch for stocks for the Bancreek U.S. Large Cap ETF (ticker: BCUS). For this flagship strategy, “We screen about 2,000 different investible equities and come up with our top 30 ideas,” he says, “but we can apply that to any investible universe.”
For BCIL, the system analyzes thousands of international equities to select the top 30 companies exhibiting characteristics associated with long-term success. “Once you venture outside the U.S. into international developed markets, you need a smartwatch even more,” says Pachman. “All of a sudden, you go from 2,000 stocks to 4,000 or 5,000 investible stocks. You need to be able to cover a lot more territory.”
The resulting portfolio includes companies across multiple sectors and themes. For example, the BCIL strategy holds several mission-critical software providers such as Netherlands-based Wolters Kluwer and England’s RELX, which deliver essential platforms to specific industries. The strategy also includes AI-adjacent companies such as BayCurrent, Japan’s version of Accenture, and ABB, a European industrial company supporting data center construction.
The BCIL strategy’s systematic approach allows it to identify companies across the market spectrum, from essential technology providers to companies benefiting from global retail trends. For instance, Pachman notes holdings such as Dollarama, a Canadian retail chain serving the value segment, and such luxury leaders as France-based LVMH and EssilorLuxottica, which cater to high-end consumers. The ability to identify diverse opportunities united by strong endurance characteristics sets BCIL apart from traditional international equity strategies.
Active Management for a Dynamic World
Even as BCIL seeks companies with high endurance characteristics, the strategy maintains an active approach rather than a buy-and-hold strategy. The systematic screening process continuously evaluates the investment universe to identify changes in company fundamentals or market conditions that warrant portfolio adjustments.
“ Our tool is going to tell us which companies have the greatest odds of being able to exhibit endurance going forward,” Pachman states. “But guess what? Some of them are going to get disrupted. So, we are constantly rebalancing.”
The ETF structure provides an efficient vehicle for implementing changes, while the systematic construction helps remove human bias from the decision-making process. Pachman emphasizes that the strategy’s tools are “living, breathing things” that continuously incorporate new data and refine their analysis.
This combination of methodical analysis and active management allows the BCIL strategy to sustain exposure to companies demonstrating strong endurance characteristics while adapting to evolving market conditions and business fundamentals. The approach offers advisors a bridge between traditional active management and passive indexing.
Portfolio Implementation Considerations
For advisors considering BCIL, the strategy can serve as a core international allocation offering access to high-quality companies identified through a repeatable process. The focused yet diversified approach may be particularly appealing given the current environment of elevated U.S. equity valuations and increasing concentration risk in major domestic indices.
“At this stage, you want at least some international equity exposure, simply because it’s been so underowned,” Pachman says. However, he adds, traditional passive approaches require investors to own thousands of companies, making it difficult to achieve strong returns. “You can’t pick 3,800 winners, but there hasn’t been a large number of actively managed options out there that have the systematic process.”
The timing for adding international exposure may be opportune given recent market movements. “If the first five or six weeks of this year are any indication, a swing back is occurring, and I don’t think people want to be caught flat-footed,” Pachman observes.
Advisors seeking to diversify away from increasingly concentrated U.S. indices might consider BCIL for its systematic approach to identifying high-quality international companies. The strategy’s active management and focus on institutional endurance provide a differentiated option for accessing global markets at what may prove to be attractive valuations relative to domestic alternatives. As the valuation gap between U.S. and international markets remains wide, BCIL’s proprietary methodology for identifying quality companies could offer advisors an efficient way to position portfolios for potential mean reversion while maintaining exposure to companies with strong business fundamentals.
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Disclosures
The S&P 500 or Standard & Poor’s 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. As used in the video, “price-to-earnings” is the ratio of a company’s stock price per share to the company’s earnings per share.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (855) 973-7880 or visit our website at www.bancreeketfs.com. Read the prospectus or summary prospectus carefully before investing.
The Funds are distributed by Foreside Fund Services, LLC.
Investing involves risk, including loss of principal. A new or smaller fund’s performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. The Fund relies heavily on proprietary quantitative investment selection models as well as data and information supplied by third parties that are utilized by such models. To the extent the models do not perform as designed or as intended, the Fund’s strategy may not be successfully implemented, and the Fund may lose value. If the models or data are incorrect or incomplete, any decisions made in reliance thereon may lead to the inclusion or exclusion of securities that would have been excluded or included had the models or data been correct and complete. Read the prospectus for additional details regarding risks.
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