Active Alts, begun trading a new Short Squeeze ETF, the Active Alts Contrarian ETF (Nasdaq: SQZZ), on Wednesday, March 22, 2017. Here is a synopsis of the new ETF:
|Name: Active Alts Contrarian ETF
|Net Expense Ratio: 1.95%
The Active Alts Contrarian ETF is an actively managed ETF which seeks current income and capital appreciation. The Fund seeks to achieve its investment objective by investing, directly or indirectly through other investment funds, in equity securities of domestic and foreign issuers traded on a U.S. exchange (including American Depository Receipts – ADRs) that the Sub-Adviser believes may be subject to a “short squeeze”, and in cash and cash equivalents, including affiliated and unaffiliated money market funds and investment grade short term fixed income securities such as U.S. Treasury securities. The Fund defines investment grade fixed income securities as those that are rated, at the time purchased, in the top 4 categories by a rating agency such as Moody’s Investors Service, Inc. (Moody’s) or Standard & Poor’s Ratings Group (S&P), or, if unrated, determined by Sub-Adviser to be of comparable quality.
A “short squeeze” occurs when investors who have sold short shares of an equity security seek to rapidly cover or buy back the short position due to actual or perceived appreciation in the security, which may occur because of positive news or events related to the company, its market sector or the market generally. Often, the additional buying momentum created by short sellers covering
their short positions escalates the increase in the price of the shares. The Fund may also lend portfolio securities that the Sub-Adviser believes may become, based on its analysis, subject to a short
In selecting securities for the Fund’s portfolio, the Sub-Adviser uses a proprietary investment process to identify equities that it believes have a higher potential for capital appreciation as a result of a short squeeze. The SubAdviser’s process for identifying short squeeze opportunities involves analysis of both fundamental factors (e.g., quality of earnings, fundamental stability of business, etc.) and technical factors (e.g., price and volume characteristics, relative strength, etc.). Using this analysis, the Sub-Adviser seeks to identify securities where, in the opinion of the Sub-Adviser, short interest is significant, is increasing or is expected to increase, but is unjustified based on the Sub-Adviser’s analysis. The Sub-Adviser may also determine to lend out portfolio securities that the Sub-Adviser believes to be strong candidates for a short squeeze to short sellers and other market participants. The Fund will receive premium income in exchange for the securities it lends.
The Fund’s portfolio may be more heavily focused in different sectors at different times depending on market conditions, and/or company, sector and industry outlooks. While the Fund is not limited with respect to its investments in any sector, the Fund limits investments in a single issuer to no more than five percent (5%) of the total assets of the Fund and to no more than five percent (5%) of the security’s public float. In addition, the Fund will limit its equity investments to companies with a market capitalization of $250 million or more.
In general, the Fund will acquire positions that the Sub-Adviser believes, based on its analysis of markets, companies and sectors, offer substantial potential for capital appreciation or the opportunity for income. Conversely, the Fund will generally sell positions when the Sub-Adviser believes the security has met its target price, the Sub-Adviser’s outlook for a market, company or sector has changed, or the Sub-Adviser believes better opportunities are available. To the extent that the Sub-Adviser has not identified equities suitable for investment, the Fund will be invested in cash or cash equivalents, such as money market funds, and at times the Fund’s investment in such investments may be significant. The Fund’s equity securities allocation and cash and cash equivalents allocations may range from 0% to 100% of the Fund’s portfolio, depending on the SubAdviser’s current assessment of market value and risk.
Fund Top Holdings (03/30/17):
|DOLLARS ON DEPOSIT NO. 15
|WEIGHT WATCHERS INTERNATI
|SANCHEZ ENERGY CORP
|THE CHEESECAKE FACTORY
|CHESAPEAKE ENERGY CORP.
|AEGEAN MARINE PETROLEUM N
SQZZ Home Page
Brad Lamensdorf launched SQZZ, a first-of-its-kind actively managed ETF.
ETF industry veteran Brad Lamensdorf is the founder and president of the ETF’s sub-adviser, Active Alts, Inc. He is the co-manager of the actively managed AdvisorShares Ranger Equity Bear ETF (NYSE Arca: HDGE), which shorts U.S. traded securities. He also produces the Lamensdorf Market Timing Report, a newsletter which provides subscribers with market timing strategy and technical analysis. His investment experience includes the position of market strategist and portfolio manager for Taylor & Company, the trading unit of Bass Brothers Enterprises in Ft. Worth, Texas. In 1998 Lamensdorf was the founder and CIO of Tarpon Partners, L.P. a long/short hedge fund in Dallas, Texas.
Here is a comment from Brad Lamensdorf who launched SQZZ:
“SQZZ is the first ’40 Act fund to employ this novel strategy of seeking to capitalize on “short squeeze” opportunities and generate potential income by getting paid for lending securities.”
The SQZZ ETF portfolio manager screens securities that are highly shorted to isolate indications of unexpected values. “Because of changing market conditions or smart management moves, highly shorted securities may have promising fundamentals, creating the potential for a profitable short squeeze,” Lamensdorf explains. “While securities lending is commonplace, SQZZ will be partnering with major banks to optimize which securities to lend and to get the most income for the fund, which may bolster returns.”