Absolute Investment Advisors, a group devoted to helping financial advisors diversify their portfolios and manage risk, launched a new ETF on NYSE Arca on Wednesday.
The Absolute Core Strategy ETF (ABEQ) is an actively managed ETF designed to seek positive absolute returns for approximately five years. There are around 1,400 funds that have functioned in a similar capacity over the past 10 years, with a total of six that have managed it over the past 20 years. The plan focuses on the purchase of 20-25 undervalued stocks.
This comes as a contrast to one of Absolute’s previous mutual funds, the Absolute Strategies Fund (ASFIX), which had a specific focus on achieving long-term capital appreciation, with an emphasis on absolute returns to traditional financial market indices. ABEQ has more immediacy (by comparison) associated with it, which may play well with the current trends of today.
St. James Investment Company, LLC, ABEQ’s investment subadviser, seeks to achieve this fund’s objective by investing primarily in equity securities of U.S. companies the adviser believes are priced at a substantial discount to the subadviser’s estimate of fair value. ABEQ may invest in companies of any market capitalization and any economic sector. The subadviser uses a five-stage process to identify, purchase, and sell companies that it believes are fundamentally attractive and will yield positive absolute returns for the five years, as mentioned above.
ABEQ is non-diversified, which means it may invest a higher percentage of its assets in fewer issuers than a diversified fund. Its expense ratio is 0.85%.
The fund may also invest all or substantially all of its assets in cash and cash equivalents, including money market funds and other short-term fixed income investments, in seeking to protect principal, or when, in the subadviser’s opinion, there are not sufficient companies at valuations appropriate for investment. As an alternative to holding cash or cash equivalents, the subadviser may invest the fund’s assets in shares of other investment companies, including open-end and closed-end funds and ETFs for the fund to be more fully invested.
ABEQ will be managed by Robert Mark of St. James Investment Company. Mr. Mark has been using this same strategy in a set of separate accounts he’s managed for three months.