If You Invested in Scharf Global Opportunity ETF (KAT)

Scharf ETF (KAT) is an exchange-traded fund that reflects the value investing approach developed by Scharf Investments. According to a launch announcement, KAT began trading on NASDAQ as an active domestic equity ETF, converting one of Scharf’s flagship mutual fund strategies into an ETF format. The fund is associated with a value-driven, risk-aware approach that aims to provide an alternative to growth-heavy equity exposures.

Investment approach and philosophy

The Scharf ETF is described as applying a disciplined value investing philosophy that emphasizes capital preservation and long-term compounding. Scharf Investments highlights a focus on investing in what it calls high-quality companies at meaningful discounts. This philosophy is presented as a way to avoid paying very high prices for businesses while still seeking attractive long-term outcomes.

The firm notes that its approach has been developed over more than four decades of practice. Rather than following growth trends or concentrating on mega-cap growth stocks, the strategy behind KAT is framed as a value-oriented alternative that looks for opportunities where price and quality align in a way the manager finds favorable.

Relationship to Scharf Investments

Scharf ETF (KAT) is tied to the investment philosophy of Scharf Investments, an independent investment firm founded in 1983 and headquartered in Los Gatos, California. Scharf Investments describes its overarching method as a Quality Value approach, which focuses on capital preservation and consistent performance across different market environments. KAT is one of the vehicles through which this philosophy is implemented in an ETF structure.

From mutual fund strategy to ETF structure

The launch announcement explains that KAT transforms an existing flagship mutual fund strategy into an ETF. By doing so, it combines the underlying value investing process with structural features commonly associated with ETFs, such as tax efficiency, transparency, and intraday liquidity. This conversion is presented as a way for investors to access Scharf’s established value strategy through an exchange-traded format.

Risk-aware positioning

Scharf Investments describes its history as one of delivering risk-aware alternatives to portfolios dominated by growth-oriented exposures. The firm emphasizes capital preservation as a central objective, alongside long-term compounding. In the context of KAT, this means the ETF is positioned as a vehicle that applies this risk-conscious, value-focused discipline to domestic equity markets.

Use of models and data

Disclosures associated with the Scharf ETFs state that the adviser may use proprietary models to identify, evaluate, and select securities, as well as to weight the portfolio. These models rely on technology and software and use both internally developed data and third-party data. The use of such models introduces specific risks, as outcomes depend on the quality of the data and the design and implementation of the models.

Key risk considerations

Information provided for the Scharf ETFs outlines a range of risks that are relevant to the strategies implemented by the adviser. These risks include, among others:

• General investment risk, including the possibility of principal loss.
• Risks associated with investments in foreign currencies and foreign issuers, such as political and economic risks, greater volatility, sanctions, liquidity constraints, currency fluctuations, higher transaction costs, delayed settlement, and differences in investor protection and disclosure standards.
• Risks related to small- and medium-sized companies, which may have less predictable earnings, more limited resources, and management teams that depend on a small number of key individuals.
• Risks associated with non-diversified funds, which may invest a larger portion of assets in fewer issuers, increasing the impact of adverse developments in those holdings.
• Risks of fixed-income securities rated below investment grade, often referred to as junk bonds, including higher default risk, potential liquidation concerns, and sensitivity to public perception of issuers.
• Risks tied to municipal securities, asset-backed securities, and certain mortgage-backed securities, including prepayment, call risk, and price volatility related to interest rates and structural features.
• ETF-specific risks, such as shares trading at a premium or discount to net asset value, the possibility that an active secondary market may not develop or be maintained, and the potential for trading halts on the exchange where shares are listed.

These risk disclosures underscore that investing in KAT involves market and strategy-specific risks, and that outcomes are not guaranteed.

Position within the ETF landscape

At launch, KAT was described as an active domestic equity ETF that offers a value-oriented alternative to portfolios heavily tilted toward growth stocks. The fund’s connection to a long-running mutual fund strategy and to Scharf Investments’ Quality Value philosophy provides context for how it is positioned among active equity ETFs. The emphasis on capital preservation, risk awareness, and value discipline differentiates its stated approach from strategies that focus primarily on growth or market momentum.

Evergreen characteristics

Several characteristics of Scharf ETF (KAT) are structural and less likely to change over time. These include its identity as an active domestic equity ETF, its association with Scharf Investments’ Quality Value philosophy, and its emphasis on disciplined value investing, capital preservation, and long-term compounding. These elements define the fund’s role as an ETF vehicle for investors seeking exposure to a value-focused equity strategy aligned with the methods developed by Scharf Investments.