Founder David Trainer

BRENTWOOD-based New Constructs LLC, the fintech led by Founder-CEO David Trainer and powered by machine learning and a measured approach to AI, is poised to provide Bloomberg Index Services Limited (BISL) with New Constructs' reports on the quality of core earnings of publicly-held companies in the Bloomberg US 1000 Index, according to a recent SEC filing.

BISL, which is a unit of New York-based Bloomberg Finance LP, is prepared to draw on New Constructs' analyses as it provides the new First Trust Bloomberg Core Earnings Leaders Index for use in support of the emerging First Trust Bloomberg Core Earnings Leaders Index ETF, which seems likely to show here soon.

The new ETF's manager is Wheaton, Ill.-based First Trust Advisors LP.

First Trust Advisors explained in last week's SEC filing, which is still under regular SEC review, that the Index will draw first from the universe of all firms included in the Bloomberg US 1000.

Ultimately, "the top companies within each sector that have the highest 'Earnings Capture' metric are eligible for inclusion for a total of 100 companies in the Index. The Earnings Capture metric aims to assess the difference between 'Core Earnings' and reported earnings as a percent of each company's total assets."

First Trust also explains, "Investment research firm New Constructs determines Core Earnings by reviewing company filings and identifying non-core and non-recurring gains and losses. Such gains and losses are identified using proprietary technology and expert analyst review of items reported on the income statement (pre-tax and after-tax), as well as hidden items found only in the footnotes and management discussion and analysis. Additionally, the relevant tax consequences of making such adjustments are included in the determination of Core Earnings." Related New Constructs background here.

VNC research suggests the opportunity that lies ahead for New Constructs with Bloomberg and First Trust is likely to prove a milestone in Trainer's entrepreneurial career -- and a likely model for replication with current and future partners.

The Leaders Index ETF filing by First Trust comes nearly three years after VNC reported that Trainer was then actively considering launching an exchange-traded fund (ETF) that would leverage New Constructs' proprietary data and insights.

This latest development comes 22 years after Trainer founded New Constructs, itself -- and eight years after he halted efforts to leverage New Constructs research to drive a long/short equity hedge fund, as reflected in his LinkedIn profile.

The new ETF Fund is a series of First Trust Exchange-Traded Fund VI. Plans call for the ETF fund to invest in securities in proportion to their respective weightings in the new Index, with allowed exceptions including, e.g., substitutions among the 100-company universe, or variations related to treatment of dividends.

According to a recent press release from First Trust Advisors, as of March 28 First Trust had assets under management or supervision of approximately $226BN, through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts.

The New Constructs website emphasizes the firm specializes in quality-of-earnings, forensic accounting and discounted cash flow valuation analyses for public companies.

Its research coverage base is said to span at least 3,000 company stocks, 7,000 mutual funds, and 400 ETFs. Its webinar offerings and blog are here and here.

New Constructs' partnerships include AmeriTrade, EY, E*TRADE and many others.

In 2018, VNC reported that New Constructs investors had over the years included such Angel investors Lucius Burch III, Bill Spitz, Richard Patton, Fred Goad, Jim Kever and Frank Bumstead, as well as then-investment firm Solidus Co.

VNC research suggests that, at some point, logical bidders for New Constructs or others in the same space could include Morningstar, MarketWatch, S&P Global, Thomson Reuters, Invesco, Fidelity Investments, and Bloomberg, among others.

L. Moneta-Koehler

Trainer was joined nearly 20 years ago by Chief Operating Officer Lee Moneta-Koehler, who continues in that role.

The founder's emphasis on scouring corporate reports for truth in the form of return on invested capital (ROIC) has brought mostly admiration. Trainer's 2020 video statement. Sample CNBC here. Previous VNC coverage here.

Trainer's earlier career included serving as senior analyst with Credit Suisse First Boston, and as a member of the investor advisory committee (IAC) of the Financial Accounting Standards Board (FASB).

He earned his bachelor's degree at Trinity University in San Antonio, and his diploma at Nashville's Montgomery Bell Academy, according to his LinkedIn.

Trainer, 51, and his wife -- both of whom were reared in Nashville -- have three children and reside in Davidson County. VNC

. last edited 1837 13 May 2024