ETF Watch: Value/Momentum Fund Planned
Alpha Architect files for an ETF that will invest in its other ETFs.
Issuer Alpha Architect has filed for an ETF that will invest in the firm’s four other existing ETFs. The Alpha Architect Value Momentum Trend ETF (VMOT) is a fund-of-funds ETF that will come with an expense ratio of 0.79%.
The fund is slated to list on the Bats exchange. Bats Global Markets is the parent company of ETF.com.
Alpha Architect’s four ETFs converted from actively managed to index-based as of Jan. 31. The four funds each track equal-weighted indexes of either value or momentum stocks. They include the following:
- ValueShares U.S. Quantitative Value ETF (QVAL)
- ValueShares International Quantitative Value ETF (IVAL)
- MomentumShares U.S. Quantitative Momentum ETF (QMOM)
- MomentumShares International Quantitative Momentum ETF (IMOM)
VMOT’s underlying index will use a risk-parity formula to determine the fund’s weighting breakdown between value and momentum exposures. The domestic and international ETFs will be weighted equally within both the value and momentum buckets, the prospectus said.
The fund can also hedge up to 100% of its portfolio, with hedging of its U.S. exposure generally implemented when the 12-month rolling return of the U.S. market underperforms relative to the U.S Treasury bill. Similarly, the international basket will generally be hedged when it underperforms the U.S Treasury bill’s total return on a 12-month rolling basis, according to the prospectus. The fund’s methodology evaluates the need for hedging on a monthly basis and reconstitutes the index on an annual basis.
It is not clear from the prospectus when VMOT will launch.
Contact Heather Bell at [email protected].
