The S&P 500 may be inching to a new high, but there are tactical strategies that have outperformed the index the past few years. Innovator Capital Management, LLC announced the Innovator Lunt Low Vol/High Beta Tactical ETF (LVHB) celebrated its three-year anniversary recently, which has ousted the S&P 500 Index’s performance over the period. 

The Innovator Lunt Low Vol/High Beta Tactical ETF (LVHB) is based on the Lunt Capital US Large Cap Equity Rotation Index, which is designed to tactically rotate between low-volatility and high-beta stocks in the S&P 500. The strategy seeks to capture alpha created by the wide dispersion between low volatility and high beta stocks. 

“We are pleased to see the Innovator Lunt Low Vol/High Beta Tactical ETF (LVHB) outpace the S&P 500 Index return over its initial three-year period since inception,” said Graham Day, CFA and VP of product & research at Innovator Capital Management. “Factor based investment strategies including low-volatility, while persistent, can sometimes experience periods of underperformance.  LVHB allows investors to tactically rotate between low-volatility and high-beta stocks within a tax-efficient ETF structure, evaluating the two sub-indices monthly, to maintain holdings in the index with the stronger risk-adjusted relative strength.”  

“According to the SPIVA report published by S&P covering the year ended December 31, 2018,” continued Graham Day, “for the ninth consecutive year, the majority of active managers (64.49%) in the U.S. Large-Cap Funds category have failed to outperform the S&P 500 Index. As investors look for alternatives to under-performing large-cap managers, LVHB offers a simple, rules based low-volatility rotation strategy that has outperformed the S&P 500 Index, and provided a better risk-adjusted return for investors.”  

LVHB Performance vs S&P 500 Index  

Time Period  Innovator Lunt Low Vol/High Beta Tactical ETF (LVHB) Lunt Capital US Large Cap Equity Rotation Index S&P 500 Index 
3 Month 3.8% 4.0% 0.8% 
YTD 25.0% 25.6% 21.0% 
1 Year 20.9% 21.6% 10.1% 
3 Year 14.9% 15.6% 13.9% 
Since Inception 14.9% 15.6% 13.9% 

Source: Bloomberg L.P. as of 10/18/2019 

 

Since Inception Innovator Lunt Low Vol/High Beta Tactical ETF (LVHB) S&P 500 Index 
Volatility 12.2% 12.7% 
Sharpe Ratio 1.09 0.98 
Beta 0.75 1.00 
Max Drawdown -16.2% -19.4% 

Source: Bloomberg L.P. as of 10/18/2019 

“We believe factor rotation offers the opportunity for outperformance as the low volatility and high beta factors move in and out of favor,” said John Lunt, President of Lunt Capital. “The Lunt Capital U.S. Large Cap Equity Rotation Index uses a rules-based factor rotation methodology. This strategy answers one of the major questions asked by investors—Which factor should I invest in right now? We believe the initial three-year performance for LVHB demonstrates the value of incorporating this strategy into U.S. Large Cap allocations.” 

LVHB Standardized Performance & Index History (%) 

 YTD 1 Year Inception 
ETF NAV 25.81% 19.11% 15.40% 
ETF Closing Price 26.25% 19.23% 15.42% 
Lunt Capital US Large Cap Equity Rotation Index 26.46% 19.86% 16.18% 
S&P 500 Index 20.55% 4.25% 14.04% 

Data as of 9/30/2019. LVHB’s inception date is 10/20/16. Performance quoted represents past performance, which is no guarantee of future results. Investment returns and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. Returns less than one year are cumulative. One cannot invest directly in an index. 

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