The NightShares family of ETFs rolled out a new brand in the ETF space Tuesday, called the NightShares 500 ETF (NSPY) and the NightShares 2000 ETF (NIWM). Both products track the after-hours performance of their associated indexes, the S&P 500 and the Russell 2000, respectively.
Each fund comes with an expense ratio of 0.55% and lists on the NYSE Arca.
The NightShares ETFs are designed around the premise of the “Night Effect.” Research from third parties and within the firm indicates that large and small cap U.S. equities tend to have better and differentiated performance during after-hours trading.
The funds achieve this exposure by holding overnight futures positions tied to their respective indexes and exiting those positions in the morning. The portfolios also hold permanent positions in cash and short-term Treasuries.
According to Max Gokhman, chief investment officer at the funds’ advisor AlphaTrAI Funds, after hours performance offers better returns, lower risk and a superior Sharpe ratio relative to a buy-and-hold strategy, with these effects intensified in the small cap space. He adds that the products can provide additional diversification to a core equity exposure at a time when bonds have not been offering it.
NightShares CEO Bruce Lavine attributes the Night Effect to a variety of factors, including the fact that earnings and M&A news tend to be released after the close or before the start of trading, and the fact that institutional investors tend to do a lot of their risk management outside traditional trading hours.
“You're much more likely to have a really bad day than you are to have a really bad night,” he said.
Contact Heather Bell at [email protected]