Distillate Capital Partners LLC

Distillate Capital Partners LLC is a Chicago-based asset management firm specializing in quality-focused equity strategies built around free cash flow fundamentals. Founded by Thomas Cole and Scott Tsegeletos, the firm emerged from the conviction that traditional valuation metrics like price-to-earnings ratios have become increasingly unreliable, while free cash flow yield provides more stable and predictive signals for identifying attractively valued, high-quality businesses. The firm files quarterly 13F disclosures with the SEC under CIK #0001741001, documenting its U.S. equity holdings across institutional mandates and its sponsored exchange-traded fund products. Distillate Capital represents the modern evolution of factor-based investing, combining quantitative rigor with fundamental economic logic to construct portfolios emphasizing quality and value characteristics. Distillate's Chicago location positions the firm within a major financial center with deep roots in quantitative and derivatives expertise. The founders' backgrounds include experience at major institutional asset managers, bringing professional investment management heritage to an entrepreneurial platform focused on differentiated quality investing. The platform provides access to the firm's complete 13F Portfolio Composition history, enabling analysis of how this free cash flow specialist has constructed portfolios through varying market conditions.

Distillate Capital Partners employs a distinctive investment approach centered on free cash flow yield as the primary valuation metric, combined with quality screens emphasizing balance sheet strength and earnings stability. The investment philosophy rejects traditional price-to-earnings methodology in favor of free cash flow analysis, arguing that cash generation provides more reliable insight into business quality and valuation than accounting earnings subject to manipulation and distortion. The free cash flow focus identifies companies generating substantial cash relative to market valuation—businesses capable of funding growth, returning capital to shareholders, and weathering economic stress without reliance on external financing. This emphasis on cash productivity naturally excludes capital-intensive businesses with weak cash conversion and speculative growth companies prioritizing market share over profitability. Quality screens complement the valuation framework, with the firm seeking companies demonstrating low financial leverage, stable cash flow patterns, and durable business models. This quality overlay distinguishes the approach from pure value strategies that may identify statistically cheap but fundamentally challenged businesses—the classic "value traps" that have historically plagued quantitative value investing. Sector Allocation History reveals how the free cash flow framework translates into sector positioning, with allocations driven by where quality and value characteristics concentrate rather than by benchmark weighting considerations. The Top 10 Holdings Concentration patterns demonstrate the portfolio's structural composition based on free cash flow screening criteria. The firm's ETF product (ticker: DSTL) provides retail investor access to the free cash flow strategy, extending the institutional approach to a broader investor base through liquid, transparent, and tax-efficient fund structure.

Distillate Capital Partners LLC represents a modern approach to quality-value investing, building investment process around free cash flow fundamentals rather than traditional earnings-based metrics. The founders' thesis that free cash flow provides more reliable valuation signals reflects growing skepticism toward accounting earnings as a basis for investment decisions. Key analytical dimensions include free cash flow factor exposure, quality characteristics relative to broad indices, and the interaction between value and quality tilts during varying market regimes. Sharpe Ratio and Sortino Ratio computation from simulated 13F replication enables risk-adjusted comparison against quality and value benchmarks, quantifying the effectiveness of the free cash flow approach. Historical Track Record analysis through 13F replication provides transparency into how the differentiated methodology has performed since the firm's founding. The Annualized Return (CAGR) calculation illuminates compounding behavior, while sector allocation patterns reveal how free cash flow screening translates into portfolio composition. The firm's ETF product democratizes access to institutional-quality factor investing, providing retail investors and advisors with efficient exposure to the free cash flow strategy. This product development reflects broader industry evolution toward transparent, liquid investment vehicles that deliver systematic factor exposures at low cost. Distillate Capital's Chicago heritage and quantitative-fundamental hybrid approach position it within the evolution of factor-based investing beyond simple value or quality definitions toward more economically grounded methodologies. How has Distillate Capital's free cash flow-focused approach historically performed during periods of significant dispersion between accounting earnings and cash flow generation, when the distinction between traditional value metrics and cash-based measures becomes most pronounced?

Distillate Capital's risk characteristics reflect its quality-value orientation and free cash flow discipline. The emphasis on financially sound, cash-generative businesses provides defensive properties during market stress, as quality companies typically demonstrate greater resilience than highly leveraged or speculative alternatives. This quality tilt can produce favorable risk-adjusted returns, though periods of speculative growth stock outperformance may challenge relative results. Max Drawdown Depth analysis across historical 13F snapshots reveals how the quality free cash flow portfolio has navigated market corrections. Companies with strong balance sheets and stable cash generation typically experience less severe drawdowns during risk-off environments, though systematic market declines affect all equity strategies. The quality orientation positions the portfolio for relative outperformance during stress rather than absolute protection from drawdowns. Volatility Profile examination contextualizes portfolio behavior relative to benchmark indices. The quality factor has historically demonstrated lower volatility than broad market indices, while the value orientation introduces sensitivity to growth-value rotation dynamics. Understanding these factor exposures enables appropriate expectations during varying market regimes. Downside Capture Ratio provides quantified assessment of defensive characteristics, measuring the portfolio's participation in negative market returns. The free cash flow discipline and quality screens are designed specifically to reduce downside capture while maintaining upside participation—an asymmetric risk/return profile sought by many investors.