Consumer spending is a powerful economic driver. That’s why Harry Dent’s firm is launching an actively managed exchange traded fund (ETF) that seeks to capitalize on these trends.
HS Dent Publishing is a research firm that analyzes demographic trends and how people spend money as they move through various life changes, and then how that spending impacts the overall economy.
That’s the basis of a new ETF from AdvisorShares: the Dent Tactical ETF (DENT), the first actively managed ETF of ETFs. While no market is off limits, Johnson says they’re more interested in emerging areas with a lot of internal growth such as India, China and Taiwan.
“Personal consumption is a big part of any economy,” says HS Dent President Rodney Johnson. “If you can forecast what they’ll buy next you can get a sense of areas that might grow.”
HS Dent already runs a fund based on the concept, and it contains a number of Pacific Rim emerging markets.
Noah Hamman, AdvisorShares’ CEO, says depending on how a financial professional manages money, the fund can be used as a core alternative, but because it is tactically managed, it could also be viewed as a satellite alternative allocation.
It’s what consumers do with their money that suggest where an economy is headed. “When you’re young, you spend,” Johnson says. Young families with young children buy throughout the duration of a child’s time at home. After the children leave, families continue to work and maintain their focus on paying down debt.
“If you can track people who go through these stages of life, you can see how the economy will change,” Johnson says.
In the United States, a fundamental change is on the horizon. Baby boomers are going to shift from being net spenders to net savers, thus pulling money out of the economy, Johnson notes.
Transparency seems to be one of the bigger questions hanging over the heads of actively managed ETF providers, but Johnson and Hamman aren’t concerned with it. For one, rebalancing in the fund will be done as the portfolio manager sees opportunities in different markets, asset classes, sectors or countries. For another, he says, people who are going to shadow you will do it no matter what, although most people aren’t going to bother.
Harry Dent is known in some circles as “The Sage of Doom and Gloom,” but Johnson and Hamman dispute that. “We are trend people, and we follow long-term trends that show themselves. We don’t say that the economy will never come back, ” says Johnson.
The Dent Tactical ETF will come with a gross expense ratio of 1.56% with estimated operational fund expenses and underlying ETF fees – admittedly higher-priced than most index-based ETFs, but “very, very competitive with most mutual funds.” The management fee is 0.95%.