Today, asset manager First Trust announced the launch of the First Trust Lunt U.S. Factor Rotation ETF (CBOE BZX: FCTR). Before fees and expenses, the fund seeks investment results that correlate to the price and yield of the Lunt Capital Large Cap Factor Rotation Index.
The index is designed to provide exposure to U.S. large cap equities, rotating among select factors when they come into favor using a propriety risk-adjusted relative strength methodology developed by Lunt Capital Management, Inc. The index rotates among eight sub-indices, which exhibit the characteristics of the high and low side of four different factors.
“We are really enthusiastic about the launch of FCTR with First Trust said John Lunt, President of Lunt Capital. “All of our research confirms the industry and academic conclusion—factors are powerful over the long-term. However, factors go in and out of season during the intermediate term. There is tremendous opportunity when looking at both sides of a factor—the traditional side — low volatility, high momentum, high value, and high quality — in addition to the “opposite side” of a factor – high volatility, low momentum, low value, low quality.”
Lunt said factor rotation has the potential to add tremendous value to factor strategies.
“Traditional single factor or multi-factor blends ignore opportunities in the ‘opposite side’ of the popular factors,” he said. “A rules-based approach that adapts to the side of factor that is ‘in season’ is an important innovation for factor investing.”