A new exchange traded fund that innovatively shorts exposure to large- and mid-cap U.S. equities without daily rebalancing and, in the process, mitigates swaps-based risks launched today on Nasdaq.
The launch comes from Virtus ETF Solutions, an affiliate of Virtus Investment Partners, Inc. (NASDAQ: VRTS) and multi-manager ETF sponsor.
The Virtus Enhanced Short U.S. Equity ETF (NYSE: VESH), which is managed by Rampart Investment Management, a Virtus affiliate that specializes in disciplined, systematic, and rules-based investment strategies, may be of interest to investors who have a bearish view of the U.S. market or want to tactically hedge the U.S. equity exposure in their portfolios.
William J. Smalley, Virtus ETF Solutions executive managing director and head of product strategy and management, said VESH is structurally different than other ‘inverse’ ETFs.
He said this is because it does not utilize swaps, does not feature a leveraged investment objective, and does not rebalance on a daily basis.
“We believe it addresses the structural issues associated with daily-rebalanced, inverse ETFs,” Smalley said.
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According to Smalley, VESH seeks to outperform 100% of the total return of the S&P 500 Index by providing inverse (short) exposure to large- and mid-capitalization U.S. equities. It systematically sells (shorts) listed futures contracts based on the S&P 500 and its sectors according to a proprietary, relative strength momentum methodology that overweights short exposure to sectors that have exhibited the weakest relative strength. As such, VESH marries a classic enhanced beta technique with short selling.
“VESH demonstrates our commitment to deliver innovative ETF solutions that seek to mitigate risk management challenges in investor portfolios,” Smalley said.
VESH, which is Rampart’s first ETF strategy, is managed by a team that is experienced at implementing hedged equity strategies to complement existing investment strategies and equity exposures. The team includes Warun Kumar, chief investment officer, and portfolio managers Michael Davis, Brendan R. Finneran and Robert F. Hofeman, Jr.
For more information on new fund products, visit our new ETFs category.