Bill Miller-Backed Rainwater ETF Bets On Boring—And That's The Point

In an age of hot stock tips and perpetually changing fund strategies, the just-launched Rainwater Equity ETF RW is taking a more subdued sort of confidence, one predicated on steady recurring revenue, consistent leadership, and the value of doing what has worked before.

Also Read: How To Invest In Fannie Mae’s Comeback With Housing-Focused ETFs

Led by Joseph R. Shaposhnik, a veteran TCW portfolio manager with an impressive record, Rainwater is making a move against what it believes are the mutual fund industry’s greatest transgressions: over-diversification, style drift, and surprise tax charges. The fund comes with a cornerstone contribution from Bill Miller, the venerable investor who managed to beat the S&P 500 for 15 consecutive years at Legg Mason.

With an expense ratio of 1.25%, the game plan of the fund is to acquire a closely held cluster of businesses whose customers continue to return. We’re referring to companies with subscription or contract-based models, software firms, trash haulers, auto part producers, and exchanges, that are apt to provide free cash flow as regularly as a clock. The portfolio will own only 20 to 30 such names, focusing on quality rather than quantity, and regularity rather than flash.

In contrast with the index-hugging crowds, Rainwater’s approach is founded on holding onto high-conviction views for the long term, not playing follow-the-lead headlines for a quarter. Shaposhnik focuses on a low-turnover, tax-savvy strategy that’s half about compounding over time and half about not messing things up unnecessarily.

In addition to the portfolio building, the fund relies heavily on alignment — not only in principle but in practice. Shaposhnik has his own money in the ETF, and there are no performance fees or complicated overlays. Just a disciplined, concentrated approach with the long-term investor in mind.

And while the ETF space isn't exactly short on new entrants, Rainwater's lineage gives it added weight. It joins a growing list of firms launched by former TCW managers, following the footsteps of others who turned boutique spinouts into marquee franchises.

For fatigued financial advisers of style drift and tax theatrics, and for clients who prefer steady, compoundable growth to rollercoaster experiences, Rainwater’s strategy might seem like, a sip of fresh water.

Read Next:

• Alibaba’s High-Speed Comeback: The AI-Commerce Cocktail Lifting ETF Hopes