Goldman Sachs JUST US Large Cap Equity ETF JUST constructs its portfolio around the American public’s preference for corporate behaviors. Its affordable and broadly diversified portfolio should provide a performance edge, though its reliance on public opinion for part of the construction process leaves room for uncertainty.

The fund tracks the JUST US Large Cap Diversified Index, which aims to reflect corporate practices that the American public considers important. JUST Capital surveys a large sample of American adults using a combination of qualitative focus groups and quantitative surveys to gather public opinions on key issues and their importance. It then gathers company-level public data on these issues for stocks in the Russell 1000 Index. The index scores and ranks companies on these issues relative to their industry peers, sweeping in the top-ranking half by count. The index is structured to reflect changes in public opinions and companies’ behavior, which does not guarantee its portfolio will remain stable over time.

The fund excludes industry giants that do not meet its standards, such as Tesla TSLA or Berkshire Hathaway BRK.B. These active bets can push its performance away from the Russell 1000 Index. For instance, removing Meta Platforms META in December 2021 boosted the fund’s 2022 return, but excluding Tesla TSLA since 2018 has hurt. 

Nonetheless, its market-cap-based weighting scheme keeps the fund close to its parent index. It starts with the industry weightings of the Russell 1000 Index and allocates each selected stock a portion of its industry’s weighting according to its market cap. Many of the stocks it excludes are smaller companies less equipped to address and provide disclosures on the relevant issues. 

The resulting portfolio sports a large-cap tilt and maintains a small active share of 20%-25% against the Russell 1000 Index. Despite holding only half of the index’s constituents, its tracking error against the index has hovered around 1%. It retained much of the diversification benefit from the Russell 1000 Index, outperforming the Morningstar Category average by 1.84 percentage points from its 2018 inception through November 2023.

Analyst Rating

A core equity exposure with some idiosyncratic risks.

Analyst

Lan Anh Tran

Microsoft

Apple

NVIDIA

Amazon

Alphabet

JPMorgan Chase & Co

Eli Lilly

Broadcom

Exxon Mobil

Goldman Sachs JUST US Large Cap Equity ETF balances its Environmental, social, and governance mandate with broad market representation. However, its use of public polling to select stocks may expose the fund to additional unpredictability, warranting a Process rating of Average.

Average

Process

Goldman Sachs’ portfolio management team is capable, but its small size and recent turnover limit its People Pillar rating to Average. 

The global ETF portfolio management team runs this strategy. Raj Garigipati heads up this group, rounded out by three managers in the United States and two managers in the Hong Kong office. The team has backfilled both of its manager departures in 2022, bringing it back to full capacity. 

Each fund has a designated primary “maker” portfolio manager and a secondary “checker” portfolio manager, ensuring appropriate oversight on trading orders before they reach the trade desk. The managers can also code and customize the technology platforms to fit their workflow, improving efficiency. The team is small but competent and much of the managers' workflow is automated, which helps mitigate key-person risk.

The launch of new active ETFs has added to the managers’ plate, but they can draw support from Goldman Sachs’ infrastructure. The firm’s trading desk handles order execution, and the broader quantitative investment solutions group provides technology platforms and risk oversight. Garigipati and the other managers are subject to oversight from an independent risk team. This unit establishes tracking-error targets for each index strategy and uses them to measure portfolio managers’ performance. Grading performance based on tracking helps align portfolio managers’ interests with investors’.

People

Goldman Sachs Asset Management heads into an uncertain direction on multiple fronts, underpinning its Average Parent rating.
GSAM has long struggled with personnel turnover, with a steady degree of analyst departures and additions coinciding with leadership reshufflings over the past few years that includes the September 2022 departure of equity head Katie Koch. Meanwhile, parent company Goldman Sachs elected to merge its asset management and wealth management units in October 2022, reversing a decision to split them in 2020, and assigned Marc Nachmann to lead the unit. Although he is a longtime Goldman veteran, most of his prior experience has been with the firm’s investment bank. Potentially complicating his remit is the firm’s December 2021 acquisition of NN IP, whose traditional and sustainable-investing branches could add capabilities but will take time to integrate. Bolstering the firm’s sustainability credentials could be especially pressing given the SEC’s November 2022 fining of GSAM for past failings in its ESG-related operations. 
GSAM has some strengths worth highlighting. Portfolio-manager ownership statistics across the firm’s U.S. lineup have improved dramatically since the firm instituted a deferred compensation program of fund shares in early 2020, and GSAM has compelling capabilities within its quantitative equity franchise.

Parent

Goldman Sachs JUST US Large Cap Equity ETF

JUST tracks a tier-weighted index of US-listed large-cap stocks selected based on a survey-based assessment of business behavior.

Goldman Sachs

An increasingly popular strategy in the world of exchange traded funds is for issuers to seed their new ETFs with internal capital.

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