Today, Main Management rolled out its second ETF. Like the $682 million Main Sector Rotation ETF (SECT), the Main Thematic Innovation ETF (TMAT) is actively managed and invests primarily in other ETFs in order to capture the theme of disruptive innovation.
TMAT comes with an expense ratio of 1.65% and lists on Cboe Global Markets, the parent company of ETF.com.
Main Management is, at its core, a firm driven by fundamental investment principles and seeks out growth at a reasonable price across its strategies, according to Director of Research Alex Varner. He notes that the strategy underlying the ETF has been available through Main Management via a separately managed account since June 2020.
“A lot of what we’re seeing now is technology driven. It’s that application of technology across the sectors that’s exciting,” Varner said.
TMAT looks to target disruptive and innovative themes with large market demand, seeking out those that seem to have been mispriced or underestimated by the market, the prospectus says, noting this is a common occurrence with disruptive innovation.
According to the document, the fund managers set price targets for different positions that may be frequently revised upwards and holds those positions until that price target is achieved or the opportunity dries up. It points out that the targeted themes may take years to develop, meaning some positions potentially can be held for decades. The portfolio is rebalanced as needed.
The investment process involves assessing the big picture to uncover disruptive themes, looking at macroeconomic fundamentals, growth forecasts, drivers of growth and consumer behavior. The themes under consideration currently include everything from genomics to artifical intelligence to cloud computing to pet care, the prospectus says.
The portfolio generally holds five to 15 different ETFs, according to the fund document. However, right now, Varner says that there are 11 holdings in the portfolio. Those include the likes of the ARK Genomic Revolution ETF (ARKG), the ARK Fintech Innovation ETF, the ProShares Online Retail ETF (ONLN), the VanEck Vectors Video Gaming and eSports ETF (ESPO) and the Global X Robotics & Artificial Intelligence ETF (BOTZ).
Varner notes that the entire portfolio offers exposure to roughly 350 different company names, with a heavy tilt toward midcap stocks. He adds that the median market cap for those names in TMAT is at $6 billion, while the Nasdaq-100 has a median market cap of $50 billion. Further, typical FANG names are less than 5% of the whole portfolio, and although Amazon is the largest single stock exposure, it represents less than 2.5% of the portfolio, he says.
TMAT can also implement option strategies in the form of covered calls and covered puts in order to smooth out performance or enhance returns, according to its prospectus.
Contact Heather Bell at [email protected]