Exchange traded funds (ETFs) that employ non-traditional strategies are capturing investors’ imaginations.

By straying from tradition, the rules-based quant strategy ETF promises pumped up returns by hedging a portfolio or taking a directional bet on a sector, niche or market, explains Scott Martindale for Trading Markets.

This next generation of indexing uses a wide range of factors, including fundamental, technical and sentiment-oriented, to get a subset of top-ranked stocks within the index. This is accomplished through a multi-factor, quantitative indexing approach, which is transparent, back-testable and repeatable.

Some of the quant-based ETFs are:

• PowerShares Dynamic Large-Cap Value (PWV): down 8.4% year-to-date
• PowerShares Dynamic Industrials Report (PRN): down 2.6% year-to-date
• Claymore/Zacks Sector Rotation Portfolio (XRO): down 9.1% year-to-date
• Claymore/Sabrient Insider Portfolio (NFO): down 7.2% year-to-date

If you’re comfortable with the idea of these ETFs, want to break with a little tradition and these funds are above their trend lines, it will be nice to have these funds as an option.

Tags: Sector ETFs