New ETF Considers Market Trends, Risk

January 05, 2021

ETF newcomer Euclid Investment Advisory is behind the launch of a new ETF issued by Toroso Investments. The Euclid Capital Growth ETF (EUCG) is an actively managed fund that implements a multi-asset class trend-following strategy and invests primarily in other ETFs.

EUCG comes with an expense ratio of 0.82% and lists on Cboe Global Markets, the parent company of ETF.com.

 

Investment Approach

The strategy relies on trend-following, market analysis and risk assessments to direct its assets into different equity asset classes across a range of size segments, geographies and sectors during times of low risk and to shift more into lower-risk investments such as fixed income and cashlike products when risk is perceived to be increasing. The prospectus states that the fund’s managers look to target ETFs of asset classes that will outperform the S&P 500 Index no matter what the market is doing.

“We at Euclid are measurement specialists, and what we’re measuring here is multi-asset class,” said John Creekmur, a principal for Euclid Investment Advisory. “We’re measuring how each of these ETFs are moving daily relative to the S&P 500.”

He compares it to a horse race, but with the ability to switch to the fastest horse for each eighth of a mile of the race. Each eligible security is evaluated daily using six movement-based criteria, with investment decisions made weekly or as needed. While the fund is heavily quantitative, Creekmur says that the investment experience of the managers also plays into portfolio decisions due to their ability to take into account geopolitical and macroeconomic criteria not included in the model.

A Portfolio Of ETFs

The fund can invest across a wide range of equity asset classes and selects its holdings from a universe of roughly 300 ETFs covering everything from specific domestic sectors to broad regional funds. The managers use a proprietary model to assess systemic market risk and the relative strength of various asset classes, according to the document, which notes that ultimately, EUCG’s portfolio holds six to 12 other ETFs.

Creekmur characterizes EUCG as a core, long-term holding that is designed to provide consistent performance to investor portfolios and can serve as a replacement for S&P 500-based products. He describes the fund’s strategy as “market driven” rather than being based on predictions of what will happen in the marketplace.

Euclid was founded in 2000 and has run a similar strategy to that of EUCG since 2010 in a separately managed account wrapper, Creekmur says.

Contact Heather Bell at [email protected]

 

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