Today, Tuttle Capital Management rolled out two actively managed ETFs that are very different from each other but tap into the current zeitgeist. The FOMO ETF (FOMO) looks to invest in securities favored by thematic ETFs, while the Fat Tail Risk ETF (FATT) looks to protect investors from significant market downturns.
FOMO comes with an expense ratio of 0.90% and lists on Cboe Global Markets. FATT charges 1.15% and lists on the NYSE Arca. Both funds are managed by Matthew Tuttle, the CEO and chief investment officer of Tuttle Capital Management.
FOMO (also an acronym for “fear of missing out”) aims to give investors exposure to popular securities. It has no limits on size or domicile with regard to the securities it can hold, and the fund can invest in special purpose acquisition companies (SPACs). It can also invest in other ETFs or ETNs and cryptocurrencies, according to its prospectus, but Tuttle says that the focus is on individual stocks.
“FOMO is our answer to what’s going on with thematic investing. It’s obviously been extremely popular, and I see a bunch of problems,” he said, citing narrow and backwards-looking indexes with infrequent rebalancing and high concentrations.
“We wanted something that could adjust really quickly to whatever happens to be the hotter or trending areas of the market,” Tuttle added, noting that the fund rebalances weekly.
He explains he wanted to offer investors a way to access hot areas of the market but with a smoother ride and more agility in its management. Right now, the fund tends to draw its holdings from stocks favored by hedge funds and retail investors as well as those that fall into the category of innovative technology, Tuttle says.
The fund selects stocks that have exhibited strong momentum as well as those that have had good long-term performance but have seen a recent abrupt sell-off. Tuttle says this approach is part of how the fund creates smoother returns than most thematic ETFs provide.
FATT, on the other hand, looks to provide a solution for investors seeking something they can hold consistently in their portfolio to reduce risk. It used to be that Treasury bonds would fill this need, but that’s no longer the case, Tuttle says.
“The idea behind FATT is positive-carry fat tail risk—something you can put in your portfolio on a permanent basis instead of trying to time it. And if the market continues to go up, it’s designed to make a little bit, 1-5%,” he said. But when the market crashes, FATT is designed to make as much to the upside as the market is down, Tuttle adds.
For now, FATT looks to maintain dynamic exposures to the S&P 500 and the VIX, according to Tuttle. However, it has the leeway to invest in other areas like fixed income and gold derivatives should the nature of the market shift.
Contact Heather Bell at [email protected]