The ETF tries to limit volatility with a “dollar-neutral” strategy. In other words, the long and short positions are typically equal so they offset.
The fund rebalances at least once a month so turnover is higher than most index-tracking ETFs. From a tax perspective, the trading activity may also trigger capital-gains distributions
“SSAM employs an actively managed, market-neutral sector rotation strategy and seeks to generate stable and consistent annual returns under different market conditions,” writes Morningstar analyst Patricia Oey in a report on the ETF.
“We think SSAM is suitable as a satellite investment as part of an alternative allocation. Since it is a dollar-neutral portfolio, we expect it to be less volatile than, and less correlated to, the overall market,” she said, adding that market-neutral strategies lag during market rallies.
Still, the ETF may appeal to risk-averse investors with a focus on capital preservation and diversification.
Oey notes there are two other fundamentals-based, market-neutral exchange traded products: ProShares RAFI Long/Short (NYSEArca: RALS) and Credit Suisse Market Neutral Global Equity ETN (NYSEArca: CSMN).
“Investors can also consider QuantShares’ suite of market-neutral ETFs that target a specific factor, such as beta and size,” she wrote. [Market Neutral ETF Outperforming in 2012]