Investors seeking to diversify an investment portfolio away from the potential risks associated with market cap-weighted indexing methodologies, especially in a prolonged bull market run, can also look to actively managed exchange traded funds.
For example, the AdvisorShares Meidell Tactical Advantage ETF (NYSEArca: MATH) tries to provide long-term capital appreciation and helps manage risk by dynamically rebalancing the Fund’s portfolio from as much as 100% equity assets to 100% fixed income assets or cash and cash equivalents depending on market trends. The active ETF can help manage risk as it seeks to minimize portfolio losses by rotating out of higher volatility assets and lower volatility assets depending on the the portfolio manager’s current view of risks in different asset classes.
“The genesis of the fund was really to give investors a place to put their money and where they can go when the market starts to decline, it will go to cash, it will go to bonds to protect them on the downside,” Laif Meidell, Portfolio Manager of American Wealth Management and the Portfolio Manager behind the Meidell Tactical Advantage ETF, said at the Charles Schwab Impact Conference.
The Meidell Tactical Advantage ETF provides exposure similar in risk to a traditionally balanced portfolio, incorporating calculus models to measure both short-and long-term exponential moving averages and the rate of change in an asset class or sector. By following this rules-based investment style, MATH removes “any emotion from its quantitative investment process.”
“MATH’s long-only, tactical strategy identifies asset classes or specific sectors that are positively trending and will dynamically adjust its allocation to be broadly diversified, concentrated, or in cash, as a mechanism to reduce overall portfolio volatility and risk,” according to AdvisorShares. “MATH is used to complement a long-term investment strategy that aims to provide better risk-adjusted returns over multiple market cycles.”
MATH is seen as a fund-of-funds as it holds broad market exposure through other ETFs. The active ETF’s current portfolio is comprised of 28.6% small-caps, 19.1% mid-caps, 10.0% emerging markets, 9.7% regional banking, 9.7% healthcare, 9.6% biotech, 9.7% financials and 3.8% Treasuries.
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