Josh Brown, CEO of Ritholtz Wealth Management, is challenging the dominance of passive index funds with the launch of a new investment vehicle dubbed ‘Porterhouse.’ This separately managed account, developed in collaboration with Franklin Templeton, utilizes a rules-based momentum strategy designed to identify and capitalize on market leaders. While low-cost index funds have long been the standard for portfolio diversification, Brown suggests that a growing segment of investors is seeking a more active, selective approach to capture significant market gains.

The strategy moves away from traditional market-cap-weighted investing, which Brown argues can be ineffective over time. Instead, Porterhouse focuses on companies demonstrating strong earnings growth and persistent share-price strength. By leveraging the ‘wisdom of crowds,’ the strategy aims to identify stocks that investors are already actively supporting, rather than attempting to forecast future market themes. Notably, the portfolio currently excludes the ‘Magnificent Seven’ tech giants, opting instead for a more diverse set of 58 holdings that includes beneficiaries of AI infrastructure, such as networking equipment provider Ciena.

Flexibility is a core component of the Porterhouse model. Unlike many exchange-traded funds that are required to remain fully invested, this account structure allows for the accumulation of cash when stocks fail to meet specific performance criteria. Brown emphasizes that this defensive capability is intended to protect capital during market downturns, even if it means the strategy remains underinvested during certain periods. The Porterhouse account is scheduled to become available to qualified Ritholtz clients starting June 1.