First Trust has overhauled an old CBOE Volatility Index-related exchange traded fund and changed the ETF to adopt a Dorsey Wright methodology that dynamically switches between equities and debt based on current market conditions.
The old First Trust CBOE S&P 500 VIX Tail Hedge ETF (NYSEArca: VIXH), which first began trading back in 2012, has been rebranded into the First Trust Dorsey Wright People’s Portfolio ETF (NasdaqGM: DWPP). The new DWPP has a 0.60% expense ratio.
The Dorsey Wright People’s Portfolio ETF tries to reflect the performance of the Nasdaq Dorsey Wright People’s Portfolio Index, which is designed to provide exposure either U.S. equities or U.S. T-Bills, based on the daily relative strength readings resulting from a wholly quantitative process, according to a prospectus sheet.
The People’s Portfolio will holds exactly one of three possible positions: all component securities in the Nasdaq US 500 Large Cap Index, all the component securities of the Nasdaq US 500 Large Cap Equal Weight Index or all the component securities of the Nasdaq US T-Bill Index.
Relative strength, or momentum, reflects the price performance of a security compared to the market average, another security or a universe of securities and is a way of recording historic price performance patterns. The relative strength reading improves if it rises more than the benchmark in an uptrend or if it decreases less than the benchmark in a downtrend. Basically, it is a way of picking out high-flying stocks that fly even higher.
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As long as the markets remain in a risk-on mode and continue to strengthen, the index will maintain its equity overweight position. The built in risk management component with T-Bills may help the fund better weather out any storms if the momentum strategy ever falters.
DWPP top sector tilts include information technology 15.0%, financials 15.0%, consumer discretionary 14.7%, health care 12.1% and industrials 12.0%. The current portfolio is equally weighted with top holdings including Freeport-McMorRan 0.3%, Alexion Pharmaceuticals 0.2% and The Boeing Company 0.2%.
For more information on new fund products, visit our new ETFs category.