A Sector Rotation ETF Strategy Targeting Attractive Opportunities

State Street has found that investment professionals are not always using a standard blueprint. For instance, one surveyed registered investment advisor held 5% of assets under management in sectors and leaned toward those thought to be undervalued while another allocated a maximum of 25% to sectors and targeted opportunities validated by fund ratings and market conditions.

Alternatively, the SPDR SSGA Global Allocation ETF’s sector allocation strategy is based on valuation, sentiment, momentum and macro-indicators.

“Building on a small set of common themes, advisors and strategists have seized on sector and industry ETFs as valuable tools for potentially capturing the opportunities that exist within the market,” Mazza added. “Sector and industry ETFs provide the ability to gain granularity in the equity markets, and they can be used to help diversify a core while improving the potential for alpha.”

For instance, GAL’s portfolio currently overweights exposure to the industrial, consumer staples, technology and consumer discretionary sectors, through the Industrial Select Sector SPDR (NYSEArca: XLI), Consumer Staples Select SPDR (NYSEArca: XLP), Technology Select Sector SPDR (NYSEArca: XLK) and Consumer Discretionary Select Sector SPDR (NYSEArca: XLY).

For more information on active funds, visit our actively managed ETFs category.