AdvisorShares, an exchange traded fund provider that specializes in actively managed products, is expected to launch a new active ETF Thursday, adding another long/short equity ETF to a growing line of products aimed at reducing overall exposure to market volatility.
According to a press release, the AdvisorShares Rockledge SectorSam ETF (NYSEArca: SSAM) tries to provide stable and consistent annual returns under all market conditions by holding both long and short positions in large-cap U.S. sector ETFs.
“Long/short equity hedge strategies seek to outperform traditional long-only equity strategies with lower risk- by utilizing their ability to seek alpha via stock selection, leverage and timely shifts in market exposures,” Noah Hamman, CEO and Founder of AdvisorShares, said in a separate press release. “However, such investment products have previously been beyond the reach of the average investor due to high minimum investment thresholds.”
The fund will hold long sector ETFs that Rockledge Advisors, the portfolio manager, believes will outperform the S&P 500 Index while shorting an equal amount in sector ETFs that are projected to underperform the S&P 500. The portfolio manager will determine component holdings based on its “Sector Scoring and Allocations Methodology,” or “SectorSAM.”
“We rotate investments between the U.S. economic sectors based on our proprietary evaluation in order to try and outperform the overall market,” Alex Gurvich, Co-Founder of Rockledge and portfolio manager of SSAM, said. “We believe that the prudent investor, who understands the risk vs. reward tradeoff, should be looking at sector investing vs. individual stocks. Holding a position in a sector can provide inherent diversification while reducing individual company risk.”
The active management theme has so far been slow to gain traction in the ETF industry. One persistent challenge for active ETFs is providing the necessary disclosure for the funds to trade properly without exposing a fund manager’s trades. [Active ETFs Wrestle with Disclosure Issues]
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.