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Direxion Files To Launch Innovative Hedged Equity ETF

By DailyAlts Staff The problem with actively managing an ETF is that regulators require daily disclosure of their holdings, and this would potentially allow fund-watchers to “front run” and undermine the ETF’s investment strategies. Eaton Vance’s NextShares “ETMFs” – exchange-traded managed funds – attempt to address this problem by doing away with the daily disclosure requirements, but this also causes the proposed ETMFs to be priced during the trading day at a discount or premium to their net-asset value, rather than in the traditional dollars-and-cents format. Thus, while the idea is good, it may take some time to get investors used to the pricing mechanism. Other proposed “active ETF” formats have yet to be approved by the SEC, but Direxion’s new long/short ETF sidesteps these problems by rebalancing its long holdings on a quarterly basis and actively managing its short exposure in a way that would be difficult (if not impossible) to “front run” – it limits its short positions to the S&P 500 index, rebalancing as often as once a day. Thus, daily disclosure will only allow fund-watchers to “front run” the new ETF’s short portion, and with the market for S&P 500 derivatives so huge, front-runners will have a minimal impact, at most. Direxion filed paperwork with the SEC on July 30, announcing its plan to launch the Direxion Credit Suisse U.S. Hedged Equity Index ETF . The fund, which is expected to launch on or around October 13, will give investors the chance to buy into an exchange-traded long/short equity strategy designed to shift exposure according to the current stage of the global economic cycle: Over-heating, Slowdown, Contraction, or Recovery. Direxion starts with the 1,500 biggest U.S. stocks, by market cap, and filters them for those with characteristics that have previously outperformed during the current stage of the global economic cycle. It selects the 100 stocks with the largest market caps that meet the criteria, and then adjusts its short exposure to the S&P 500 from 0% to 100% of the long position, based on rolling 3-month risk-adjusted return and mean-reversion indicators of the S&P 500. This is also the methodology of the Credit Suisse U.S. Hedged Equity Index, the new ETF’s benchmark. Although Direxion’s new ETF is innovative, it isn’t the first equity-hedged ETF on the market. According to ETF.com , ProShares, First Trust, and Credit Suisse operate similar funds, including the ProShares RAFI Long/Short ETF (NYSEARCA: RALS ), which debuted on December 9 and has a five-star rating from Morningstar.

ABR Dynamic Funds Launches Tactical Equity And Volatility Fund

By DailyAlts Staff On August 3, ABR Dynamic Funds launched a new liquid alternative mutual fund: The ABR Dynamic Blend Equity & Volatility Fund (MUTF: ABRVX ). The fund joins a growing list of funds that utilize volatility as an asset class, and will do so using a model-driven investment approach to tactically allocate its assets between equities, equity volatility, and cash. Typically, the ABR Dynamic Blend Equity & Volatility Fund will invest at least 80% of its assets in equities and equity-related derivatives, with total holdings split between three sleeves: Equities (i.e., instruments that track the S&P 500); Equity volatility (i.e., instruments that track the S&P 500 VIX short-term futures); and Cash (i.e., cash and cash equivalents). The index that the fund tracks is designed to capture favorable volatility movements in the equity markets while maintaining equity exposure to preserve positive performance during extended periods of rising markets. Objective & Approach The ABR Dynamic Blend Equity & Volatility Fund’s investment objective is to provide results that generally correspond to the ABR Dynamic Blend Equity & Volatility Index, as calculated by Wilshire; a benchmark index that measures the returns of a “dynamic ratio” of large-cap stocks and the volatility of large-cap stocks. In other words, the ratio of stocks, equity volatility and cash isn’t static over time. This is explained in the prospectus as follows: The Fund is systematically rebalanced once daily to replicate the ratio of the Index’s exposure to the S&P 500 Total Return Index, the S&P 500 VIX Short-Term Futures Index, and cash based on the investment model’s assessed volatility in the market and the historic returns of the underlying indexes. The Fund’s exposure to the S&P 500 Total Return Index increases in periods of relatively low market volatility, as determined by the Index, which reflects the investment model and compared to historic levels of market volatility. During periods of extremely low volatility in the equity markets, the Fund’s exposure to the S&P 500 Total Return Index may approach 100%. The Fund’s exposure to the S&P 500 VIX Short-Term Futures Index increases in periods of relatively high volatility. During periods of extremely high volatility in the equity markets, the Fund’s exposure to the S&P 500 VIX Short-Term Futures Index may approach 50%. The prospectus also notes that the fund “may also convert to a full cash position as necessary to remain consistent with the cash position weighting of the Index,” but doesn’t make it clear as to what type of market environment would trigger a move to cash. Management & Share Classes ABR Dynamic Funds is the fund’s investment advisor, and the firm’s Taylor Lukof and David Skordal are its portfolio managers. Mr. Lukof is the founder and CEO of Dynamic Funds and also CIO of ABR Management. Mr. Skordal is an accomplished professional trader turned portfolio manager with a dozen years of experience in the investment industry. Together, the two men are charged with the task of the day-to-day management of the new fund. Shares of the ABR Dynamic Blend Equity & Volatility Fund are available in investor (MUTF: ABRTX ) and institutional classes. Investment management fees are 1.75% Investor shares have a net-expense ratio of 2.25% and a minimum initial investment of $2,500 Institutional-class shares have a net-expense ratio of 2.00% and an initial minimum of $100,000. For more information, visit the advisor’s website . Share this article with a colleague

Rothschild Continues To Build Team, Multi-Strategy Fund In Top Decile

By DailyAlts Staff In a flurry of recent activity, Rothschild Asset Management has expanded its presence in the alternative investments business. A pair of hirings since July 21 have bolstered the firm’s capabilities in both the institutional and retail markets, and Rothschild recently celebrated the one-year anniversary of the alternative mutual fund it co-runs with Larch Lane . These moves come on the heels of CEO Michael Woods’s March appointment, and the April hiring ( announced in January ) of Shakil Riaz as Global CIO and Head of U.S. Alternative Portfolio Management. Fund Anniversary The $61 million Rothschild Larch Lane Alternatives Fund (MUTF: RLLIX ) celebrated its one-year anniversary on July 27, outperforming the HFRX Global Hedge Fund Index, the MSCI World TR Index, and Morningstar’s Multialternative category in its first year. Through July 31, the fund’s Institutional share class had one-year returns of 7.09%, which ranked in the top 9% of funds in its category. The fund, which is the product of a joint venture between Rothschild and Larch Lane, is designed to perform well under a variety of market conditions, and to have limited correlation to the broad stock and bond markets. Both Rothschild and Larch Lane have decades-long track records managing hedge-fund portfolios, and the Rothschild Larch Lane Alternatives Fund offers a “proven capacity to source and allocate to emerging hedge fund managers and liquid strategies,” according to a statement issued by Rothschild. The fund currently uses four managers to sub-advise the fund, each implementing a different strategy: Ellington Management Group, L.L.C – Relative Value / Tactical Trading Karya Capital Management LP – Discretionary Global Macro Mizuho Alternative Investments, LLC – Systematic CTA Winton Capital US LLC – Equity Trading “As investors turn to non-traditional strategies to generate returns in varying market environments, the Rothschild Larch Lane Alternatives Fund is proving to be a compelling option,” said Larch Lane COO David Katz in a recent statement. “By utilizing a multi-manager structure that offers diversification across a variety of asset classes, trading time frames, investment styles and strategies, the Fund has a broad opportunity set from which to potentially profit.” Recent Hirings Rothschild’s presence in the alternatives space has been expanding at an accelerating rate. On July 21, the firm announced the hiring of Joseph Gill, formerly of Pentegra Retirement Services, to join the firm’s institutional sales team; and on August 3, Brinker Capital’s Jennifer Kulp joined Rothschild’s retail distribution team. With recent hirings in both the institutional and retail spaces, Rothschild is demonstrating an across-the-board commitment to the emergence of alternative strategies. Commenting on the pair, Rothschild’s CEO Michael Woods said: “Joseph brings over 20 years of institutional sales and relationship management experience in both traditional and alternative investment management to the firm. He will be instrumental in continuing Rothschild’s consistent presence and long-standing relationships with institutional clients;” and “Jennifer’s addition to the firm will help to further deepen our expertise, broaden our reach across the retail marketplace, and widen distribution channels, which is integral to our growth strategy for North America. I am certain Jennifer’s experience and longstanding client relationships will add immediate value to our retail team.” Mr. Gill will play a “key role” in within Rothschild’s New York-based institutional sales team. Previously, he was with BlackRock, Blackstone, JPMorgan, and the Bank of Tokyo-Mitsubishi, in addition to co-founding Thane Capital. In her newly created position, Ms. Kulp will be responsible for leading Rothschild’s retail distribution strategy and working with distribution channels to help financial advisors achieve their goals. Her prior experience includes a 20-year stint with Brinker Capital, where she was most recently a Managing Director in the firm’s Wealth Advisory Sales group. “I am excited to join Rothschild at a time when the firm is expanding its retail presence and increasing its retail client coverage in the region, and I look forward to contributing to its continued success,” said Ms. Kulp.