“Investor behavior is the biggest risk to investor success and the behavior gap is a well-documented topic,” Gardner said. “Academic theory has a difficult time modeling human behavior which makes the transfer of backtested paper performance to real world portfolios difficult. How you get from point A to point B matters, and the behavior between those two points determines how much you get of what the market is going to give.”
The ETF employs a type of smart-beta indexing methodology that includes an active component in the way it selects its holdings and the frequency at which it rebalances to adhere to its strategy.
“BEMO provides the benefits of an index based ETF, but the index is not asleep at the wheels,” Gardner added. “Behavioral Momentum is sensitive to market changes by continuing to refine in favorable markets but also has the ability to step out of equities if the environment dictates that. The uncertain environment we are in makes the value proposition of Behavioral Momentum that much more compelling and the ETF structure makes access to the methodology easily accomplished.”
BEMO’s current sector allocations include consumer cyclical 3.7%, financials 4.3%, real estate 8.5%, telecom 8.2%, energy 4.1%, industrials 8.0%, tech 3.8%, consumer defensive 26.7%, healthcare 4.0% and utilities 28.6%. The sector weights more or less conform with current market trends, with overweight positions in outperforming utilities and underweight underperformers.
Top holdings include Ameren Corp (NYSE: AEE) 4.1%, American Water Works (NYSE: AWK) 4.3%, Cincinnati Financial Corp (NasdaqGS: CINF) 4.2%, CMS Energy Corp (NYSE: CMS) 4.1% and Campbell Soup (NYSE: CPB) 3.7%
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