A recent filing from ETF Series Solutions on behalf of Salt Financial, a fintech company, outlines plans for an ETF that will target companies expected to exhibit more volatility relative to the broad U.S. market and more likelihood of outperforming the broad market in a rising market. The Salt truBeta High Exposure ETF (SLT) will track an index based on Salt Financial’s “truBeta” metric.
The fund focuses on large- and midcap companies that meet basic liquidity requirements, targeting an initial universe of 500 stocks. The truBeta metric is designed to measure a stock’s systematic risk, essentially its projected beta.
The scale starts with a truBeta score of 1.00, which is essentially equal to the risk/return profile of the U.S. stock market. A company with a higher score would have a higher degree of expected volatility, while a lower score would suggest a lower expected volatility relative to the broader market, according to the prospectus.
The index selects the 100 stocks in the universe with the highest truBeta scores and equal-weights them. No more than 30% of the stocks in the index can be from the same sector. Should that happen, the index excludes the stocks that have the lowest truBeta scores, and selects the next-highest ones from other sectors. It is rebalanced quarterly, the document says.
The prospectus notes that SLT’s underlying index had an average truBeta level of 1.58, indicating a much higher expected volatility than the broad market.
The fund is slated to list on Cboe Global Markets, the parent company of ETF.com, and come with an expense ratio of 0.50%.
The most comparable fund currently on the market is the PowerShares S&P 500 High Beta Portfolio (SPHB), which charges 0.25% and has $443 million in assets under management. Both portfolios also cover 100 large-cap stocks each.
Contact Heather Bell at [email protected]