Elkhorn Investments is rolling out a smart beta exchange traded fund that shifts from a low volatility to high beta strategy as a way to help investors adapt to changing market conditions.
The Elkhorn Lunt Low Vol/High Beta Tactical ETF (BATS: LVHB) is expected to begin trading Thursday, October 20. LVHB will come with a 0.49% expense ratio.
“LVHB is a tactical, low cost, alpha-seeking U.S. large cap strategy delivered to investors in a high capacity, liquid, and tax-efficient ETF structure,” according to Elkhorn.
Specifically, LVHB will try to reflect the performance of the Lunt Capital U.S. Large Cap Rotation Index, which utilizes a proprietary relative strength methodology to rotate between the S&P 500 Low Volatility Index and the S&P 500 High Beta Index based on which sub-index exhibits the stronger relative strength measurement at the end of each month, according to a prospectus sheet.
SEE MORE: High Beta ETF Confirms Increased Risk Appetite
The S&P 500 Low Volatility Index is made up of 100 securities from the S&P 500 Index with the lowest realized volatility over the past 12 months – volatility is a statistical measurement of the magnitude of up and down asset price fluctuations over time.
The S&P 500 High Beta Index is made up of 100 securities from the S&P 500 Index that have the highest sensitivity to market movements, or “beta,” over the past 12 months – beta is a measure of relative risk and is the rate of change of a security’s price.
The low vol/high beta index has been outperforming the broader S&P 500 index. According to S&P Indices data, the Lunt Capital US Large Cap Equity Rotation Total Return Index has increased 9.1% year-to-date and generated an average annualized return of 19.4% over the past five years.
SEE MORE: Look to a High Beta ETF Strategy for a Risk-On Environment
ETF investors should be familiar with the two sub-indices as the S&P 500 Low Volatility Index and S&P 500 High Beta Index are the underlying benchmarks for the two popular PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and PowerShares S&P 500 High Beta Portolio (NYSEArca: SPHB), respectively.
For more information on new fund products, visit our new ETFs category.