ETF Watch: Janus Rolls Out 4 Niche Funds

June 09, 2016

Janus is expanding its ETF lineup today with four funds that take its offering in a new direction. The Health and Fitness ETF (FITS), The Long-Term Care ETF (OLD), The Organics ETF (ORG) and The Obesity ETF (SLIM) all launched on the Nasdaq exchange and come with expense ratios of 0.50%.

The four funds track indexes from Solactive that cover various health-related themes via companies listed in emerging as well as developed markets.

According to the prospectus, ORG targets companies that are involved in, or supporting through their services, the production, distribution and sales of organic foods, not only for consumption as food, but also for cosmetics, supplements and packaging.

FITS covers firms in the fitness industry that produce or market related technology, equipment and clothing; that operate fitness centers; and that are involved in nutrition-related business lines.

SLIM invests in companies that provide services and products to the portion of the population that is obese, ranging from biotechnology companies that address obesity-related diseases and health problems, to standard health care companies, to weight-loss-program and supplement providers.

OLD targets firms involved in the provision of senior housing, nursing services and specialty hospitals.

Behavioral Momentum Fund To Debut

Investment advisory firm Aptus Capital Advisors (ACA) is making its first entry into the ETF space today with the launch of a momentum strategy ETF on the Bats Global Markets Exchange (which owns ETF.com).

The Aptus Behavioral Momentum ETF (BEMO) comes with an expense ratio of 0.79% and tracks an index designed to allocate fund assets into either a portfolio of U.S. companies or into a portfolio of ETFs tracking Treasurys.

BEMO’s stock portfolio includes 25 large- and midcap U.S. stocks chosen based on momentum and investor behavior, with the latter measured by comparing the stock’s current price to its recent highest price. Individual sector weightings are capped at 30% of the index at reconstitution. The index is reconstituted on a monthly basis, the prospectus said.

“True momentum is only half of what we’re looking at. The other aspect of what we’re looking at is investor behavior,” noted ACA’s JD Gardner.

“It’s pretty simple. We’re focused on momentum—the same momentum that everybody looks at—and we’re focused on proximity to 52-week highs, which is the level where we think people are prone to make irrational decisions,” he added.

In Case Of Drawdown

If, on a reconstitution date, any major broad U.S. equity index has experienced a 10% drawdown, the index switches its entire allocation into ETFs tied to the performance of 7- 10-year Treasury notes. The allocation switches back to equities when U.S. equities are above their short-term moving average on a reconstitution date.

“In a market environment like we’ve had—where the market hasn’t gone anywhere—we’re going to be in those stocks that are maintaining their proximity to their 52-week highs. In a rip-roaring market, we’re going to be in the ones that are making the most new highs,” Gardner said of the strategy.

“The other separator of what we’re doing is that we recognize that markets are not always favorable, meaning that there are periods of prolonged downtrends, and we have a mechanism in place that allows us to effectively get out of the way of big left-tail events,” he noted.

Constituents are equally weighted, with the equal weights reset each time the index moves from its Treasury ETF portfolio into its stock portfolio.

Gardner says that in the current market environment, with interest rates near zero, investors are being forced to take on more risk. That means when things get turbulent, investors can make bad decisions. He believes BEMO is a solution to that problem.

“Everybody talks about investor behavior as a risk, but I don’t think it’s as effectively addressed as what it needs to be. Advisors need access to something that can explicitly manage both market and behavior risk,” he said.

Additional Updates

 

Contact Heather Bell at [email protected].

 

 

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