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New AdvisorShares Accuvest Global Opportunities ETF Hopes To Generate Alpha Via Country Rotation Strategy

Michael Johnston

By Michael Johnston:

AdvisorShares added to its rapidly-growing lineup of active ETFs today with the debut of the AdvisorShares Accuvest Global Opportunities ETF (NYSEArca:ACCU - News), which utilizes country-specific ETFs with the goal of generating excess returns relative to benchmarks such as the MSCI All Country World Index. Accuvest, the portfolio manager of the new ETF, utilizes a proprietary country ranking model that considers nearly 40 different factors to rank countries from least attractive to most attractive. The new ETF will consist of the five or six country ETFs representing the most attractive markets on a monthly basis.

ACCU is the first ETF to implement that type of “country rotation” strategy. “In an environment where disciplined investors and advisors are searching extensively for alpha, we believe the turmoil in global markets is providing opportunity at a country level,” said David Garff, CIMA, co-Portfolio Manager of ACU. “Our benchmark agnostic approach of using the highest-ranked single country ETFs aims to minimize risk during times of extended market moves in one direction or another, allowing ideal exposure to global equities within a broadly diversified portfolio.”

Under The Hood

Ticker ETF %
[[THD]] iShares MSCI Thailand Investable Market Index Fund 21.1%
[[IVV]] iShares S&P 500 Index Fund 20.6%
[[EWZ]] iShares MSCI Brazil Index Fund 15.9%
[[EZA]] iShares MSCI South Africa Index Fund 14.6%
[[ERUS]] iShares MSCI Russia Capped Index Fund 13.5%
[[FXI]] iShares FTSE China 25 Index Fund 13.4%
Cash 1.1%
As of 1/25/2012

Though the composition of ACCU will regularly change, the portfolio at launch has a definite tilt towards emerging markets; three of the BRIC countries are represented, and five of the six total holdings are developing economies. The only developed market represented in the ACCU portfolio is the U.S., through a position in the iShares S&P 500 Index Fund (NYSEArca:IVV - News). Thailand, represented by the iShares MSCI Thailand Investable Market Index Fund (NYSEArca:THD - News), is the largest individual holding at about 21% of assets.

Impressive Track Record

While ACCU is brand new, Accuvest has served as a portfolio manager to the Global Opportunities Composite since October 2005. That composite, which has substantially similar investment objectives to the ETF, has beaten the MSCI All Country World Index by a meaningful margin since inception:

1 Year 2 Year 3 Year 4 Year 5 Year 6 Year Inception
Global Opportunities Composite -19.17% 0.59% 13.74% -4.84% -2.06% 2.75% 3.95%
MSCI ACWI Index -7.35% 2.17% 12.01% -5.06% -1.93% 1.56% 2.51%
As of 12/31/2010. Inception = 10/1/2005

ACCU charges a management fee of 0.95%, and comes in at a bottom line expense ratio of 1.78%. However, net expenses are capped at 1.25% for at least a year from the date of the fund’s prospectus [see ACCU Fact Sheet].

AdvisorShares ETFs

With the launch of ACCU, AdvisorShares now offer 13 active ETFs with aggregate assets of about $400 million. The largest products in the company’s lineup are the Cambria Global Tactical ETF (NYSEArca:GTAA - News) and Active Bear ETF (NYSEArca:HDGE - News).

Accuvest also serves as the manager to the Global Long Short ETF (NYSEArca:AGLS - News), which combines long positions in the most attractive single-country funds with short positions in those deemed to be least appealing. That fund was originally launched with Mars Hill as the manager, but a dismal early performance record prompted a reshuffling. AGLS currently has its largest long positions in Brazilian small caps (NYSEArca:EWZS - News) and Thailand (NYSEArca:THD - News); the biggest single country short bets are on Austria (NYSEArca:EWO - News) and India (NYSEArca:EPI - News).

Disclosure: No positions at time of writing.

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