Tracking Market Momentum with a New Smart Beta ETF

ALPS partnered with Dorsey, Wright & Associates to launch a smart-beta exchange traded fund strategy centered around a momentum style that invests at both the sector and stock level.

On Tuesday, ALPS rolled out the ALPS Dorsey Wright Sector Momentum ETF (NasdaqGM: SWIN). SWIN has a 0.40% gross expense ratio.

SWIN utilizes Dorsey Wright’s proprietary Point and Figure Relative Strength charting to craft a high conviction portfolio of 50 stocks. The momentum strategy is similar to buying high flyers and betting on even higher moves.

“We are excited to collaborate with such a prestigious company,” Tom Carter, President of ALPS Advisors Inc., said in a note. “The combination of Dorsey Wright’s research and our focus on product innovation has created a new strategy for enhancing portfolio construction.”

Specifically, the new ETF tries to reflect the performance of the Dorsey Wright US Sector Momentum Index, which is comprised of stocks with the highest relative strength or momentum within the Nasdaq US Large Mid Cap Index on a sector-by-sector basis.

“‘Relative strength’ is an investing strategy that seeks to determine the strongest performing securities by measuring certain factors, such as a security’s relative positive performance against the overall market or a security’s relative strength value, which is derived by comparing the rate of increase of the security’s price to that of a benchmark index,” according to the fund prospectus.