According to THOR Financial Technologies’ chief investment officer Brad Roth, the problem with most traditional low-volatility funds is that they experience “the full brunt and force of a market drawdown” during “periods of market stress.”
“What we’re seeing in traditional low volatility is that in periods of market stress, we’re really seeing that those funds are experiencing the full brunt and force of a market drawdown,” Roth said at Exchange 2023.
Speaking with NYSE’s Judy Shaw for “ETF Leaders, Powered by the New York Stock Exchange,” Roth explained that what THOR is “trying to solve is low volatility in the market, especially in large-cap U.S. equities as well as mitigating some downside capture.”
That’s a problem THOR is looking to address with the THOR Low Volatility ETF (THLV), an actively managed low-volatility equity strategy on the New York Stock Exchange. THLV seeks to provide investment results that generally correspond, before fees and expenses, to the performance of the THOR U.S. Low Volatility Index.
THLV invests in large-cap equities across 10 sector ETFs: financial, industrial, energy, technology, healthcare, materials, utilities, consumer discretionary, real estate, and consumer staples. The ETF rebalances weekly to determine if sectors are risk-on or risk-off, where sector allocations transition into money market funds or cash to minimize negative returns.
“What our fund is going to do is going to get defensive in some of those areas to help mitigate some of that downside capture,” Roth said. “We’re going to get defensive and use cash as an asset class.”
When asked about his market views for the year, Roth said that while “this year we started off hot,” he is “cautiously optimistic” about the future.
“I think that likely we’re going to see some more downside this year, and I wouldn’t be surprised if we tested those lows from last year,” he added.
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