ETF Filing: FormulaFolios Plans More Funds

Proposed ETFs will use similar approach to previously launched products.

FormulaFolios is looking to bring two more funds-of-funds to market via its partnership with Northern Lights. The FormulaFolios Tactical Growth ETF (FFTG) and the FormulaFolios Smart Growth ETF (FFSG) will use similar methodologies to the pair launched under the same brand in June.

Like the other ETFs marketed under this brand, the new proposed funds will also invest in other ETFs using a quantitative active management approach.

Tactical Growth

The tactical growth fund will select its holdings by ranking five asset classes—U.S. stocks, ex-U.S. developed-market equities, real estate, gold and U.S. aggregate bonds—based on their price momentum. From there, the fund’s methodology selects the top three asset classes and discards the two lowest-ranked ones. The asset classes are equal-weighted and represented by index-based ETFs selected based on their cost, tracking error and liquidity, according to the prospectus.

If there are not a least two asset classes that exhibit price momentum, the fund will shift the assets into short-term Treasurys, the prospectus said.

Smart Growth

Meanwhile, the “smart growth” fund’s portfolio is evaluated monthly and rebalanced annually. The strategy divides its portfolio into two equal parts. One half is primarily focused on growth-oriented domestic and foreign equity ETFs that have higher-than-average risk levels with regard to large drawdowns relative to growth asset classes as a whole.

The other half of the portfolio is determined by whether the market is in a bullish or bearish trend, as indicated by an investment model that looks at various market indicators. When it is bullish, the second half of the portfolio will be invested in the same way as the first half. However, when the market trend is bearish, the holdings will be in Treasuries and cash equivalents, the prospectus said.  

The funds are slated to list on the Bats exchange, which is owned by ETF.com’s parent company, CBOE. The filing did not include expense ratios.

A Growing Brand
FormulaFolios was behind the launch of the FormulaFolios Tactical Income ETF (FFTI) and the FormulaFolios Hedged Growth ETF (FFHG) in early June. Both of those funds are actively managed funds-of-funds that invest primarily in other ETFs and rely on quantitative approaches.

FFTI has just over $100 milllion in assets under management, while FFHG has roughly $35 million.

Contact Heather Bell at [email protected].