A New Smart Beta ETF to Diminish Downside Risk

As market conditions grow more volatile, investors can utilize the new Recon Capital Managed Risk exchange traded fund to smooth out a bumpy ride.

Recon Capital recently came out with the Recon Capital USA Managed Risk ETF (NYSEArca: USMR). USMR has a net expense ratio of 0.30%.

USMR will try to reflect the performance of the STOXX USA 900 Minimum Variance Unconstrained USD Index, which follows a rules-based methodology that weights securities to minimize the portfolio variance compared to the parent STOXX USA 900 USD Index.

“The unconstrained version is a novelty as it provides a strategy index that is minimized for volatility, but is not restricted to follow the underlying base index too closely,” Matteo Andreetto, chief executive officer of STOXX Limited, said.

Specifically, the underlying index may screen for risk factors like value, growth, medium term and short-term momentum, leverage, liquidity and exchange rate sensitivity. Investors will also have access to Axioma’s Factor Risk Model, which utilizes a portfolio optimization algorithm that is normally used by large large institutions and money managers.

The ETF rebalances monthly to adapt to changes in the market as a way to provide optimal risk-adjusted returns.