John Davi & Frank Tedesco

John Davi is the first recurring guest on Behind the Ticker , he was on previously to discuss Astoria's inflation ETF PPI, and this time he brings partner Frank Tedesco to talk about their newest launch: ROE, the Astoria US Quality Kings ETF. But before diving into the product, they open with a market discussion that captures the mood of late 2023: a year that defied nearly every consensus call on Wall Street.

2023: The Year Consensus Got It Wrong

John lays it out directly: "There were three big consensus calls going into 2023. One, there was going to be an economic recession. Two, there was going to be an earnings recession. And three, people were preparing for a death-comp left-tail risk for equities , a down 20% year." Astoria's counter-view: not all three would materialize, because consensus rarely does. They were right. The earnings recession showed up, but neither the economic collapse nor the equity crash played out.

"We're classic late-cycle," John says. "Crude oil rallying, people concentrated in a few select stocks , the Magnificent Seven. It just feels very late-cycle." Rather than making short-term tactical bets, Astoria's approach is longer-term strategic: "How do we build a portfolio for the next two, three years and make intelligent decisions where we think we're going to be compensated on a risk-adjusted basis?"

Their positioning pillars: real rates staying higher for longer (driven by a healthier consumer, tight labor markets, and sticky inflation), which translates to looking away from U.S. mega-cap tech, including inflationary-linked bets, being more active in fixed income, and maintaining liquid alternatives for asymmetric risk.

ROE: Equal Weight Meets Quality

The ROE ETF is built on two core premises backed by long-term data. First, equal weighting: "If you go back to 1999, the S&P 500 Equal Weight Index has fairly significantly outperformed the S&P 500 market-cap weighted index." With concentration risk at extreme levels , a handful of stocks making up an outsized portion of the cap-weighted index , equal weighting provides structural diversification.

Second, quality. Among all factor premiums, quality has shown the highest Sharpe ratio , "per unit of risk you're taking, you're getting a better return." It may not produce the highest absolute returns, but it delivers better predictability. "Higher quality companies outperform the market and lower quality companies underperform , you can look at the Fama-French data."

The construction is specific: 100 of the highest-quality U.S. stocks, sector-optimized to the broader large-cap universe. "If the market has 28% tech, we'll also have 28% tech in our ETF. But instead of three stocks making up 16-17% of that 28%, we'll have 28 different tech stocks each making up 1% of the total ETF." The starting universe is all U.S. listings, screened down to roughly 800 by minimum market cap ($5 billion), minimum free float (25%), and adequate average daily volume ($50 million over six months).

Quality Screening by Sector

The quality screening uses ROA, ROE, and return on invested capital, but the specific combinations differ by sector based on historical research. "Different combinations of those metrics through different periods such as one year or five year best define each sector," Frank explains. So the quality definition for a tech company isn't the same as for a utility , it's tailored to what actually predicts outperformance within each sector.

Rebalancing is annual for additions and deletions, with quarterly tolerance checks that bring positions back to 1% if they've drifted (say, to 1.25%). John emphasizes the approach is "systematic active, not like we're picking Ford versus GM , it's all rules-based. The actual implementation of it is active."

The Concentration Problem

The episode lands at an important moment in market history. The Magnificent Seven's dominance has created a market where most investors are far more concentrated than they realize. ROE represents a direct response: broad quality exposure without letting any single name dominate the portfolio. Equal weighting across 100 high-quality names, sector-aligned to the market, gives advisors a way to stay invested in equities while dramatically reducing single-stock concentration risk.

For Astoria, it's the second ETF in what's clearly a growing lineup , and given Davi's media presence (CNBC appearances, strong Twitter following), the distribution strategy mirrors what's worked for PPI: build the brand, build the audience, let the product speak for itself.

On the launch mechanics, John shares a revealing data point: Astoria seeded their first ETF with $50 million in eight days, drawn from their existing advisory business. The speed of that seed is unusual and reflects the advantage of having a built-in client base. But he's realistic about the distribution timeline beyond the seed: "People need to see a five-year track record, seven-year track record. It takes years." The grind of building awareness, managing the volume objection, and earning advisor trust is the same whether you seed with $50 million or $5 million , the starting line just looks different.

Key Takeaways

• John Davi is the first recurring guest on Behind the Ticker , he was on previously to discuss Astoria's inflation ETF PPI, and this time he brings partner Frank Tedesco to talk about their newest launch: ROE, the Astoria US Quality Kings ETF.
• But before diving into the product, they open with a market discussion that captures the mood of late 2023: a year that defied nearly every consensus call on Wall Street.
• John lays it out directly: "There were three big consensus calls going into 2023.
• And three, people were preparing for a death-comp left-tail risk for equities , a down 20% year." Astoria's counter-view: not all three would materialize, because consensus rarely does.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.