In 2017, more than 270 exchange traded products debuted in the U.S. Some new exchange traded funds are off to impressive starts. That group includes the Main Sector Rotation ETF (Cboe: SECT), which debuted in September.
The Main Sector Rotation ETF is an actively managed fund that tries to outperform the S&P 500 during rising markets while diminishing losses during declining periods.
“The Main Sector Rotation ETF seeks to achieve its objective through dynamic sector rotation. Sector selection is optimized by carefully reviewing the sector, industry, and sub-industries in the fund’s portfolio and allocating to sectors which appear undervalued and poised to respond favorably to financial market catalysts,” according to Main Management.
As of Dec. 29th, SECT had $239.1 million in assets under management, an impressive sum among 2017’s new ETFs, but even more so when considering the ETF’s September launch.
The active ETF will act like a fund of funds and invest in sector-based equity ETFs, achieving its target through a sector rotation strategy. Main Management will review the sector, industry and sub-industries in the fund’s portfolio, chooses sectors it believes are undervalued and poised to respond favorably to financial market catalysts and sell securities when it achieves its target price or no longer undervalued.
SECT currently holds 10 other ETFs, nine of which are equity funds and one of which is a fixed income fund. Top holdings in SECT include the Technology Select Sector SPDR (NYSEArca: XLK), Financial Select Sector SPDR (NYSEArca: XLF) and the Health Care Select Sector SPDR (NYSEArca: XLV).
Those three ETFs combine for 48% of SECT’s roster. Rising interest rates are seen helping U.S. banks and the related ETFs. The Federal Reserve has boosted borrowing costs twice this year and bond market observers widely expect a third rate hike when the Fed meets in December. The financial services sector could be working its way into a period of long-term out-performance. The recent rally in the sector could still be in the early innings, according to some market observers.
In 2017, XLK and XLV were among the best-performing cap-weighted sector ETFs.
ETFs that are selected in its fund-of-funds methodology will be based on various factors in the respective ETFs, including underlying index and portfolio holdings, sector exposure and weightings, liquidity profiles and tracking error.
Seven of SECT’s holdings are SPDR ETFs while the remaining ETFs are iShares products.
For more information on new fund products, visit our new ETFs category.