Interesting Products 1
Simplify US Equity Plus Downside Convexity ETF
SPD is one of the first ETFs to launch from Simplify. The fund is actively managed and seeks capital appreciation by investing the bulk of portfolio assets in ETFs providing exposure to the S&P 500 Index combined with a modest allocation in a put option overlay. The option strategy is designed to provide downside protection without capping any upside participation, or in other words, creates downside convexity in the fund. The specific put option contracts are selected strategically based on the adviser’s evaluation of relative value, strike price and maturity. Investors should anticipate a non-linear relationship between the fund’s and market returns. Meaning, by exercising put options, the fund adviser expects the fund’s return to fall less than the market. It is important to note that the fund’s goal of protection against losses is not guaranteed.
Eurekahedge Tail Risk Hedge Fund Index is up 57%
A portfolio made up of a 3.33 percent allocation to the CBOE Eurekahedge Tail Risk index, for example, and a 96.67 percent allocation to the S&P 500 lost 11.4 percent in March and has gained 5.2 percent since the end of 2019.
Vanguard High Dividend, Low-fee, Yield-focused Yield ETF: NYSEARCA:VYM
The fund’s performance is similar to the S&P 500 Index. The March 2010 to March 2021 performance is $60.07 to $101.12. Extremely Low Fees: expense ratio of 0.06%, the lowest expense ratio. Annualized dividend yield is slightly more than 3%, not high. Porfolio breakdown:
- 22.4% financials sector
- 13.2% healthcare
- 12.5% consumer staples
- 10.0% industrials
Coal Funds
Third Point, Makuria, and Odey
AI fund AIEQ
A current standout is the AI Powered Equity ETF (ticker AIEQ), a $102 million vehicle that has returned about 9.9% in 2023 through Wednesday, compared with 4.7% for the S&P 500 Total Return Index.
AIEQ uses a quantitative model running 24/7 on IBM Corp.’s Watson platform to assess more than 6,000 US publicly traded companies each day. It scrapes regulatory filings, news stories, management profiles, sentiment gauges, financial models, valuations and more.
The product, developed by EquBot LLC and overseen by ETF Managers Group LLC, can be quick to shift holdings and exposure levels, making it a barometer of sentiment for observers. It entered 2023 with a mixed allocation. Major holdings currently include home furnishing firm RH, Las Vegas Sands Corp., sustainable power company Constellation Energy Corp. and JPMorgan Chase & Co.
Returns analysis shows that the ETF’s consumer discretionary holdings — including shares in the likes of Caesars Entertainment Inc., Kohl’s Corp. and the meme-stock favourite GameStop Corp. — have been the biggest driver of performance this year. However, expand the time horizon and AIEQ’s market-beating prowess comes undone. Since its 2017 inception, the ETF has handed investors about 41%, according to data compiled by Bloomberg. The S&P 500 Total Return Index has delivered more than 72% in the same period.
“It works best when it can catch on to momentum names in the growth space,” said Jessica Rabe, co-founder of DataTrek Research. “It struggled to find momentum names in a highly volatile stock market last year, and when it’s had the best track record, it’s been during bull markets when it favours tech names.”
AI Funds
If it were naming names, it would likely mention the $419 million WisdomTree U.S. AI Enhanced Value Fund (AIVL), one of the largest. Alongside its sister fund, the $82 million WisdomTree International AI Enhanced Value Fund (AIVI), it underwent changes a year ago to incorporate AI and machine learning into its strategy and name.
AIVL has returned about 0.8% in the past year while AIVI has lost 2.6%, versus a 6.1% loss for the S&P 500 Total Return Index. The two funds are posting mixed performance against the benchmark in 2023, with gains of 3.7% and 7.9%, respectively.
Also nearing an anniversary is the $26 million AdvisorShares Let Bob AI Powered Momentum ETF (LETB), which turns one-year-old next month and analyses a blend of data to gauge both fundamental sentiment and technical price momentum. It has lost about 9.2% since launch, but is roughly flat in 2023.
One specialist issuer, Qraft AI, runs several small funds powered by machine. Its $12 million Qraft AI-Enhanced US Large Cap Momentum ETF (AMOM) has returned 4.5% this year.
Meanwhile, the $1.7 billion SPDR S&P Kensho New Economies Composite ETF (KOMP) is the largest and most eye-catching of the cohort. One of a number of State Street Global Advisors funds incorporating machines, it tracks an index that uses AI and quant methodologies to pick stocks benefitting from, among other things, AI. It’s up 10% this year.
Matt Bartolini, head of SPDR Americas Research at State Street, says the use of AI means the fund can analyse a much larger set of potential investments than humans alone can manage.
“AI looks at thousands of pages in mere seconds,” Bartolini said. “You can increase productivity in the coverage scope than with a more human-based approach.”
