Tag Archives: nysearcarals

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.

Hull Launches Its First ETF Product For U.S. Market

Hull Tactical Asset Allocation, in partnership with Exchange Traded Concepts, a white label exchange traded fund (ETF) service provider, has recently launched a new fund that employs a long-short strategy with the potential to profit from both rising and falling market conditions. The fund trades under the name Hull Tactical U.S. ETF (NYSEARCA: HTUS ). Below, we have highlighted some of the details about this newly launched product for investors keen to include this type of fund as part of their portfolio. Hull Tactical U.S. ETF The newly launched actively managed ETF seeks long-term capital appreciation by investing in U.S. equities and Treasuries markets. The fund uses proprietary, patent-pending, quantitative trading model, to take long and short positions in ETFs, leveraged ETFs or other securities that seek to track the performance of the S&P 500. The model is designed to forecast the returns of the S&P 500 for the next six months. Also, the fund is constructed to perform under all market conditions. The ETF currently holds 69.7% in the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). However, the active strategy renders the fund pretty expensive with 99 basis points as annual fees How Does it Fit in the Portfolio? The fund is a good option for investors seeking to stay invested in the market under all conditions. “A wide range of investors – from sophisticated retail investors, to independent advisors to endowments and pension funds in the institutional space – should find our product advantageous,” says Steve McCarten, Chief Operating Officer of Hull Tactical Asset Allocation. Given the current equity market condition, investors can expect to reduce volatility exposure to the equity market through this fund. This is especially true as the long-short positions taken by the fund help to withstand volatility. Moreover, the fund is expected to provide higher diversification benefits as the long strategy is believed to be highly uncorrelated to the traditional asset classes. “Investing in the S&P 500 can be an uncertain game, but a disciplined and systematic approach can help you to outperform on a risk-adjusted basis,” says Blair Hull, Founder of Hull Tactical Asset Allocation. Competition Though the long-short space is not much crowded, it is gaining popularity every passing day and seeing a buildup in assets. The ProShares RAFI Long/Short ETF (NYSEARCA: RALS ) is expected to be the biggest competitor for the newly launched fund in the long-short space. This passively managed fund has an asset base of $46.7 million and charges 95 basis points as expenses. Apart from this, the First Trust Long/Short Equity ETF (NYSEARCA: FTLS ) is also likely to pose some competition for the fund. The actively managed product manages a relatively small asset base of $16.1 million and charges 95 basis points. Thus, it needs to be seen whether the newly launched ETF, which is slightly expensive to both the existing products, is successful in garnering a sizable asset base. Given its high expense ratio in the space, the success is expected to be a huge factor of the net returns the fund manages to deliver. Link to the original post on Zacks.com