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.
The index would screen and isolate sectors with the greatest momentum, excluding real estate, and further narrow the selection to 50 stocks, with 10 stocks selected from each of the top 3 performing momentum sectors and 5 stocks for each of the next 4 performing sectors.
“SWIN is the first Momentum ETF to combine both macro (sector) and micro (stock) level screens,” Mike Akins, SVP & Head of ETFs for ALPS, said in a note. “We believe its unique two-screen construct creates opportunity for outperformance in strong sector momentum cycles, while simultaneously maintaining a diversification cushion to help weather periods where no clear sector leadership is present.”
Sector weights include information technology 20.2%, industrials 20.0%, consumer cyclical 19.9%, healthcare 10.0%, financials 10.0%, energy 10.0% and basic materials 9.9%.
Top holdings include Tesaro 2.3%, Advanced Micro Devices 2.2%, NVIDIA 2.1%, Targa Resources 2.1% and Amazon 2.1%.
For more information on new fund products, visit our new ETFs category.