Using a strategy that provides exposure to the momentum factor, the AGFiQ U.S. Market Neutral Momentum Fund (MOM) is up 4.88% quarter to date, according to XTF data.
MOM seeks results that are in tune with Dow Jones U.S. Thematic Market Neutral Momentum Index. In order for the fund to accomplish its goal, “MOM provides exposure to the ‘momentum’ factor by investing long in U.S. equities that have had above average total returns and shorting those securities that have had below average total returns,” according to the fund’s fact sheet.
The securities in the index include the top 1,000 eligible securities by market capitalization, including real estate investment trusts, in the Dow Jones U.S. Index. The momentum of a stock is based on its total return, a function of price performance and dividend returns over the first twelve of the last thirteen months.
The fund’s approach is working and should continue to be effective as long as high momentum price stocks outperform low momentum price stocks. The way the fund is set up there is an opportunity to generate positive returns regardless of the direction of the general market.
The performance of the fund hinges on the difference in the rates of return between its long positions and short positions.
The issuer provides an example: “If the Fund’s long positions appreciated more rapidly than its short positions, the Fund would generate a positive return. If the opposite occurred, the Fund would generate a negative return. In choosing to track a market neutral index, the Fund seeks to limit the effects of general market movements on the Fund.”
MOM currently has $7.63 million Asset Under Management. It comes with a 1.88% expense ratio.
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