Factor Rotating ETF Launches

Today Global X Funds launched a factor-focused ETF that bets on mean reversion in its effort to generate outperformance.

The Global X Adaptive U.S. Factor ETF (AUSF) tracks the Adaptive Wealth Strategies U.S. Factor Index. The strategy essentially toggles between three factor-based subindexes, each comprising 100 stocks: minimum volatility, momentum and value.

AUSF owns at least two of these factors, equally weighted, at all times. When all three are in the portfolio, the breakdown is 40%/40%/20%, with the lowest allocation being to the factor that’s performed the best. The methodology is based on the idea that mean reversion means top performers may face downside, and underperformers may do well in the future. The ultimate goal is to outperform market-cap equity strategies.

"The lesson that we've learned keenly over the last year has been that market environments can change rapidly, leaving investors seeking dynamic strategies that can adjust to a changing landscape," said Jay Jacobs, senior vice president and head of research and strategy at Global X Funds.

Top portfolio holdings include Tribune Media (TRCO), AGNC Investment (AGNC), Annaly Capital Management (NLY) and Starwood Properties (STWD). (You can see what other ETFs own these securities in our ETF stock finder tool.)

Global X designed this strategy with Carroll Financial Associates, the firm behind the Adaptive index strategies. AUSF, which is part of Global X’s lineup of Core ETFs, has a 0.27% expense ratio and lists on the NYSE Arca.

Contact Cinthia Murphy at [email protected]