“Following two devastating bear markets in the last 17 years, investors, especially those nearing or in retirement, recognize the vulnerability of equity markets and are seeking risk management solutions. EquityCompass has been successfully utilizing active risk management in our portfolios since 2009,” Richard E. Cripps, CFA, Chief Investment Officer at EquityCompass, said in a note.
Both TERM and ERM focus on U.S.-listed companies. Both will generally hold S&P 100 stocks and the smaller stocks in each of the S&P 500’s 10 sectors. When the U.S. equity market is determined to be unfavorable, the ETFs may invest all or a portion of their portfolio assets in cash, cash equivalents or short-term fixed income.
The major difference between the two options is that TERM may include a significant exposure to securities designed to provide short exposure to U.S. markets during volatile periods when the strategy shifts to cash or cash equivalents, which may help it outperform ERM during pullbacks.
“We believe these ETFs will be useful tools for investment advisors seeking to manage risk in their clients’ portfolios, while maintaining exposure to US equities. As sub-advisor, EquityCompass brings a unique approach to risk-management, supported by years of rigorous empirical research,” Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust, said in a note.
For more information on new fund products, visit our new ETFs category.