The evolution of the ETF universe has spawned dozens upon dozens of innovative offerings that make it easy and cost-effective to tap into strategies and asset classes that were previously out-of-reach for mainstream investors. With over 1,400 exchange-traded funds to chose from, and new launches every month, some investors might feel a little intimidated when it comes time to picking a product that best suits their needs; investors looking to tap into sector rotation ETFs have more than a handful of options to choose from [see Free Report: How To Pick The Right ETF Every Time].
In this head-to-head battle, we will consider two sector rotation ETFs; Huntington‘s US Equities Rotation Strategy ETF (HUSE) and AdvisorShares Rockledge SectorSAM ETF (SSAM) [try our Free ETF Head-To-Head Tool].
These ETFs both employ sector rotation strategies, however, there is an important distinction that must be made; HUSE can underweight or overweight certain sectors as deemed necessary, while SSAM takes short or long positions in the sectors. This means that HUSE is essentially a long-only sector strategy, wheres SSAM stands to offer lower-volatility over the long-haul given its flexibility to take long and short positions.
HUSE, which follows the S&P 1500, is about 5 times larger than SSAM with almost $6 million in total assets since launching in July of 2012. The biggest difference between these two sector rotation ETFs lies in their management strategy. SSAM is an actively managed fund, charging a 1.50% annual expense ratio for its hands on approach, while HUSE is rule based, costing investors only 0.95% [see also ETF Sector Rotation Strategies: Beyond The SPDRs].
Appeal & Best Fit
These sector rotation ETFs seek to generate stable and consistent returns in all market conditions, developing a dollar neutral portfolio that will effectively capture the delta between the long and short positions. The appeal behind this strategy is that HUSE and SSAM always have the potential to deliver positive returns, regardless of whether the general market is rallying or slumping [see also Nine Twists On Sector Investing].
Six Month Return HUSE, SPY, SSAM, and ITOT
While the concept is admirable, the execution of these funds has been less than stellar. Consider the historical performances of each ETF since inception, January 2012 for SSAM and July for HUSE. Over this time period, SSAM has returned below the S&P 500 (represented here by SPY (SPY)) but has experienced far less volatility. In this same time period, HUSE has managed to keep up with the S&P 1500 (represented here by ITOT (ITOT)) but has barely outperformed the index.
The Bottom Line
Over the last 6 months there seems to be no question that HUSE is more competative, not only because of its higher returns, but also its lower expense ratio. But investors who are nervous that with the approaching fiscal cliff will come another recession should not write off SSAM so quickly. It may have performed below the benchmark, but has shown extremely low volatility in comparison. Investors may also feel more comfortable with its active management strategy.
Disclosure: No positions at time of writing.
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- July 2012 ETF Roundup: Launches, Filings, And Closures
- Huntington Launches Sector Rotation ETF (HUSE)
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- AdvisorShares Plans SectorSAM ETF