The Scharf ETF uses a bottom-up, value-oriented approach to invest in quality companies trading at a significant discount to fair value. The portfolio is concentrated in 25 to 35 high-conviction ideas across market caps and geographies, with a focus on low valuation ratios intended to enhance long-term returns and reduce downside risk. The strategy holds positions over a full market cycle, keeping turnover and volatility relatively low.
Strategy Profile
Scharf ETF (KAT): A Concentrated Value Equity Strategy
Book a MeetingA profile of the strategy, the firm behind it, and the people who run it, written for advisors evaluating whether a Section 351 exchange is worth exploring with a client. Nothing here is an offer, a solicitation, or a recommendation of any security or investment product.
The Strategy
Strategy characteristics are targets described by the manager, not limits or guarantees, and may change without notice. Information on this page is provided by the manager and has not been independently verified by ExchangiFi.
See If A Client Portfolio Qualifies
Create a free ExchangiFi account, upload holdings, and run the diversification and liquidity tests before you raise the idea with a client. Free to register, free to use, no credit card.
Create A Free AccountAbout The Firm
Scharf Investments is an independent registered investment adviser headquartered in Los Gatos, California. The firm has applied a consistent, value-oriented investment approach since its founding in 1983, deliberately keeping a limited number of portfolios so it can focus on quality over quantity. As of December 31, 2025, the firm manages approximately $4.2 billion in assets.
A GIPS compliant, independently verified track record refers to the presentation and verification of historical composite performance. It is not a statement about future results, and past performance does not guarantee future results. No performance data is presented on this page. Firm diligence materials, Form ADV and composite performance are available directly from the manager.
The Team
The strategy is overseen by Scharf Investments’ Investment Committee, chaired by the firm’s president.
Brian A. Krawez, CFA
President & Chairman of the Investment Committee
Brian Krawez joined Scharf Investments in 2007. He previously was a partner and head of research at Belden and Associates Investment Counsel, where he managed a Large Blend portfolio. He holds a Bachelor of Science with honors in business administration and an MBA from the Haas School of Business at the University of California, Berkeley, is a Chartered Financial Analyst, and is a member of the Security Analysts of San Francisco.
Eric Lynch
Managing Director, Investment Committee
Eric Lynch joined Scharf Investments in 2007 and serves as a Managing Director and member of the Investment Committee. He previously worked as a management consultant with Accenture and PricewaterhouseCoopers Japan, serving Fortune 500 clients in consumer services and capital markets. He earned his Bachelor of Arts degree from John Carroll University in 1993.
Biographical information is provided by the manager. References to prior firms and roles describe individual professional history only. They are not representations about results achieved at those firms and should not be read as an indication of future performance.
What Is A Section 351 Exchange?
Section 351 of the Internal Revenue Code is a long standing rule: when one or more persons transfer property to a corporation solely in exchange for that corporation’s stock, no gain or loss is recognized on the transfer. It is the same principle founders rely on when they contribute assets to a newly formed company, applied to portfolios of marketable securities. Advisors often describe it as the 1031 exchange of the equity world, though the two provisions are separate and work differently.
In practice, an investor holding appreciated securities contributes those securities in kind to a newly organized entity and receives shares of that entity in return. Because nothing is sold, no capital gain is realized at the moment of the exchange. The investor’s original cost basis and holding period carry over to the new shares, so the deferred gain travels with them and is recognized when the shares are eventually sold. Deferral is the benefit. Elimination is not on offer.
A short walkthrough of the software: uploading holdings, running the diversification and liquidity tests, and reading the results.
What A Contributed Portfolio Has To Clear
80 / 100
Strategy alignment
At least 80 percent of contributed positions should align with the fund's intended portfolio, and 100 percent should sit within the universe of positions the strategy could hold.
25 / 50
Diversification test
Under Section 351(e), no single issuer above 25 percent of contributed value, and the five largest together no more than 50 percent.
Alignment is the manager’s call. The diversification test is the tax question, and missing it can cause the transfer to be treated as a taxable sale in full. Other conditions matter in practice as well. The exchange cannot be a pre arranged sale in substance, post contribution changes to the portfolio are examined, tax law can change, and the Internal Revenue Service may look past the form of a transaction to its substance. This is why the work is done with counsel and a tax advisor rather than on the strength of a marketing page.
More detail, including common questions on qualification, timing and cost, is answered on our Section 351 exchange FAQs.