A Quality ETF with a Built-In Market Hedge

Aptus Capital launched its second ETF, a strategy that hones in on attractively priced companies with a quality twist and hedges against significant equity market downturns when the market is seen as overvalued.

On Tuesday, Aptus Capital rolled out the Aptus Fortified Value ETF (BATS: FTVA), which has a 0.79% expense ratio.

The Aptus Fortified Value ETF tries to reflect the necromancer of the Aptus Fortified Value Index, a rules-based, equal-weighted index that provides exposure to 50 of the most undervalued U.S. stocks and hedges against potential downturns if the markets are seen as overvalued.

The index is usually composed of 50 common stocks and real estate investment trusts, but if the U.S. equity market is seen as overvalued, a so-called tail hedge of long put options is executed. When the tail hedge is not in effect, the index is 100% long equities. If the tail hedge is implemented, the index is composed of 99.5% of equity component and a 0.5% tail hedge, according to a prospectus sheet.

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