Merlyn.AI Debuts ‘Best Of Breed’ ETF

Merlyn.AI Debuts ‘Best Of Breed’ ETF

The fund, designed for advisors, holds only the largest ETFs.

Reviewed by: Heather Bell
Edited by: Heather Bell

Today, Merlyn.AI followed up its launch of the Merlyn.AI SectorSurfer Momentum ETF (DUDE) with another momentum-based ETF-of-ETFs tracking an index informed by artificial intelligence, but with an additional twist. The Merlyn.AI Best-of-Breed Core Momentum ETF (BOB) selects its investments from what the firm terms “giga-cap” ETFs—those with $10 billion or more in assets under management.

BOB comes with an expense ratio of 0.85% and lists on Cboe Global Markets, the parent company of

“The main distinction is that it’s made for the core position of an advisor’s portfolio,” said Merlyn.AI co-founder and CEO Scott Juds, who points out that by investing in extremely large ETFs, advisors don’t really have to worry about the SEC questioning the suitability of BOB’s portfolio. The strategy was designed based on conversations with RIAs regarding their concerns, he says.

Juds notes that aside from the size requirement for its holdings, BOB offers the same strategy for downside protection and momentum on the upside as Merlyn.AI’s other ETF products.

Currently, according to data from FactSet, there are 117 ETFs that meet the fund’s minimum size threshold, although it is not clear that all of these ETFs would fulfill the other requirements of BOB’s methodology.

The Methodology

The new ETF’s underlying index uses an algorithm with an artificial intelligence component to determine if markets are trending upward or if a bear market is anticipated. The artificial intelligence inclusion means that the algorithm can improve upon itself as it gathers more and more data, according to the prospectus.

Generally, when the algorithm signals a bull market, the index will adopt a 70/30 split between domestic and international equity ETFs using three ETFs that fall into the category of sector, factor or global funds. If a bear market is indicated, the index calls for ETFs that are relatively less risky; these can include ETFs representing a wide range of fixed income, from Treasury to junk bond funds, as well as gold or equity funds, the document says.

It further notes that as of mid-December, BOB’s underlying index held the Industrial Select Sector SPDR Fund (XLI) (52.84%), the iShares Russell 2000 ETF (IWM) (37.20%) and the SPDR S&P Midcap 400 ETF (MDY) (9.96%).

BOB is the fourth ETF in Merlyn.AI’s lineup. DUDE, its third ETF, launched in late December and currently has more than $100 million in assets under management.

Contact Heather Bell at [email protected]


Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.