ETF Chart of the Day: Investing With Legends

With the Federal Reserve exiting the market and returns estimated to be harder to find in 2015, there is a new ETF in the Actively Managed Space, VALX (Validea Market Legends ETF, Expense Ratio 0.79%).

VALX is the first ETF from Connecticut based, Validea Capital Management. Outside of this foray into the ETF issuer space, Validea currently runs 17 different models and manages almost 700mm in assets, and has been in existence since 2004. While Validea has a successful track record in running different portfolios, this is the first foray into the ETF space.

VALX is competing with GURU (Global X Top Guru Holdings Index, Expense Ratio 0.75%) and IBLN (Direxion iBillionaire Index, Expense Ratio 0.65%) in the “Famous Investor” space, but there are some substantial differences between VALX and its two chief competitors.

In recent communications with the fund managers in regards to the VALX methodology we came to several conclusions: 1) VALX does not rely on waiting for 13F filings to rebalance their portfolios, rather they have incorporated 10 different models to rebalance every 28 days and proactively rebalance rather than waiting for quarterly information.

The strategies utilized in VALX include models based on Warren Buffet, Ben Graham, Peter Lynch and other legendary investors. The strategy is comprised of 6 value-oriented approaches and 4 growth/momentum models, thus giving the portfolio a nice mix of strategies for various market environments. 2) VALX consists mostly of small/mid cap names, but not tied to any specific index, giving them what looks like much greater flexibility in holdings.

The portfolio maintains 97% active share vs. the S&P 500 and Russell 2000. 3) VALX’s system relies exclusively on fundamentals in attempts to remove all emotion and subjectivity out of the stock selection process so that the buy and sell discipline is both repeatable and consistent over time and free of biases that often times hurt investors’ long term returns.