The hedge acts like a long put on a broad U.S. market ETF equal to 0.5% of the index’s total weight. A long put is an options strategy where a put option is purchased as a speculative play on a downturn in the price of the underlying equity or index, which is typically used to hedge a long stock position.
The equity component is screened on fundamental measures, including ree cash flow relative to its size, return on capital employed (a measure of profitability relative to a company’s capital), and change in price-
to-earnings ratios over the past five years.
The tail hedge calculates the U.S. equity market’s “Q Ratio”, a measure of the total market capitalization of the U.S. equity market divided by the net worth of U.S. companies. When the Q Ratio is above the median based on its history, the tail hedge is implemented on the next business day or the last business day of the month where it remains in place for the next full month.
For more information on new fund products, visit our new ETFs category.