Two Dynamic Active ETF Strategies for Changing Market Conditions

FormulaFolio Investments is stepping into the exchange traded fund arena with two actively managed ETFs that will focus on areas of strong forward momentum.

The new ETF provider came out with the FormulaFolios Hedged Growth ETF (BATS: FFHG) and the FormulaFolios Income ETF (BATS: FFTI) on Tuesday. FFH has a 1.15% expense ratio and FFTI has a 1.00% expense ratio.

Jason Wenk, Founder and Chief Investment Officer of FormulaFolioFunds and Derek Prusa, Senior Market Analyst of FormulaFolioFunds, will act as the portfolio managers of the active ETFs.

The FormulaFolios Hedged Growth ETF will try to generate capital growth by investing primarily in domestic equity securities of any market capitalization and U.S. Treasuries through other ETFs, so the fund acts like a fund-of-funds.

FFHG’s portfolio managers will first identify trends in the equity markets, and if the market is doing well as measured by a blend of various technical momentum indicators, the model will invest in leveraged ETFs, or ETFs that use financial derivatives to amplify the returns of an underlying index. On the other hand, if FFHG’s managers find that the market is doing poorly by a blend of various technical momentum indicators, the fund’s model will invest in U.S. Treasuries or inverse equity index ETFs, or ETFs that profit from a decline in the value of an underlying benchmark.

The active ETF will not hold more than 15% of assets in leveraged or inverse ETFs.