AdvisorShares, the Bethesda, Md.-based firm that specializes in actively managed ETFs, today launched a sector fund-of-funds ETF that’s designed to generate consistent returns in any market environment through a sector-rotation system.
The AdvisorShares Rockledge SectorSAM ETF (NYSEArca:SSAM - News) is a long/short portfolio that invests in the top-performing sectors while shorting those that are expected to have low or negative returns.
Rockledge Advisors, a subsidiary of Conn.-based investment advisory firm Rockledge Group that’s known for sector investing, manages the fund. The ETF has a net annual expense ratio of 1.50 percent.
SSAM relies on Rockledge Advisors’ proprietary quantitative sector scoring and allocation methodology, or SectorSAM. The system determines which U.S. sectors look most and least promising by forecasting each sector’s excess return within a specific time frame relative to the broad stock market as measured by the S'P 500 Index.
“The U.S. economy goes through various growth cycles, which means there should be relative sector variations at all times,” Rockledge’s co-founder and SSAM portfolio manager Alex Gurvich said in a press release.
“We rotate investment between the U.S. economic sectors based on our proprietary evaluation in order to try and outperform the overall market,” Gurvich said.
SSAM strives to maintain a dollar-neutral portfolio—meaning the dollar value of long positions is equal to that of short positions—as a way to mitigate risk, according to information in the fund’s prospectus filed with U.S. regulators.
“We believe that the prudent investor, who understands the risk vs. reward tradeoff, should be looking at sector investing vs. individual stocks,” Gurvich added. “Holding a position in a sector can provide inherent diversification while reducing individual company risk.”
In total, the firm has nearly $450 million of assets under management in its 11 ETFs.
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