iSectors, begun trading a new ETF, the iSectors Post-MPT Growth ETF (Nasdaq: PMPT) on Wednesday, August 17, 2016. Here is a synopsis of the new ETF:
|Symbol: PMPT||Exchange: NASDAQ|
|Name: iSectors Post-MPT Growth ETF||Net Expense Ratio: 1.55%|
The iSectors Post-MPT Growth ETF is an actively managed ETF which seeks growth of capital, with a secondary emphasis on capital preservation, independent of individual market conditions. The Fund is a “fund of funds” that seeks to achieve its investment objective by using an objective and quantitative algorithm based on Post-Modern Portfolio Theory (Post-MPT) to allocate assets across various asset classes and/or sectors of the U.S. securities markets (Primary Investments).
What is MPT? Based on research published in the late 1950’s, Modern Portfolio Theory (MPT) assumes that investors are risk averse, markets are efficient (i.e., fairly priced) and the allocation of an investment portfolio, as a whole, is more important than individual security selection. In addition, MPT favors long-term investing, diversification that seeks an asset allocation with the highest return per any given level of risk. MPT advisers have traditionally used Mean Variance Optimization (MVO) to construct portfolios. MVO is a method of determining portfolio allocation that seeks to reduce the total risk of a portfolio without sacrificing returns by focusing primarily on each potential investment’s standard deviation (i.e., volatility as a measure of risk), expected return and correlation.
What is Post-MPT? Based on investment research published post-1959, Post-MPT seeks to enhance how MPT principles are applied. In addition to the factors considered by a traditional MPT adviser, the Sub-Adviser’s proprietary Post-MPT model also takes into account monthly changes in more than a dozen capital market and economic factors, including, without limitation, interest rates, inflation rates, gross domestic product (GDP), unemployment rates and money supply. Further, as opposed to MPT, which seeks to avoid volatility, the Sub -Adviser’s Post-MPT model only considers negative returns (i.e., loss of money) as “risk”.
The traditional (i.e., buy and hold) approach to U.S. equities diversification typically involves allocating assets among 9 asset classes (including large, small and mid-capitalization stocks that are categorized as either growth, value or a blend styles). However, the Sub-Adviser believes that these asset classes have become so correlated (especially in down markets) that diversification among these classes is not sufficiently effective in reducing risk. Instead, the Sub-Adviser’s model allocates assets across the following nine Primary Investments: basic materials, bonds, energy, financials, gold, healthcare, real estate, technology and utilities. The Sub-Adviser believes that these nine Primary Investments effectively represent the entire U.S. equity universe while evidencing a low correlation that permits diversification that helps to reduce risk. Under normal market conditions, the Fund’s assets are reallocated monthly among some or all of the Primary Investments in accordance with the Sub-Adviser’s model, at which time the Fund may allocate between 0% and 30% of the Fund’s assets to any particular Primary Investment, with the exception of gold, to which the Fund may allocate up to 25% of its assets, and bonds, to which Fund may allocate up to 50% of its assets. Additionally, the Fund will typically seek to allocate approximately 2% of the Fund’s assets to cash, although this allocation is expected to vary at times. At each monthly rebalance, the Sub-Adviser’s goal is to achieve a portfolio allocation that maximizes returns while minimizing losses. The Fund may not invest in any Primary Investment to the extent that it would cause the Fund to invest 25% or more of its total assets in securities of issuers in any particular industry.
While the Fund may invest directly in equity or fixed income securities, the Sub-Adviser will generally implement its strategy by investing in ETFs, including, without limitation, leveraged ETFs, to gain exposure to the foregoing asset classes. The Fund may invest in securities of issuers of any market capitalization, and there are no limits on the maturity or quality of the fixed income securities in which the Fund may invest. As a result of its trading strategy, the Fund may sell portfolio securities without regard to the length of time they have been held and will likely have a higher portfolio turnover rate than other registered investment companies.
Top Holdings (08/22/16):
|ISHARES 20+ YEAR TREASURY BO||16.56%|
|VANECK VECTORS GOLD MINERS E||16.15%|
|VANGUARD REIT ETF||14.55%|
|PROSHARES ULTRA 20+ YEAR TSY||14.40%|
|ISHARES U.S. ENERGY ETF||13.35%|
|ISHARES NORTH AMERICAN TECH||13.02%|
|ISHARES US UTILITIES ETF||8.97%|
|VANGUARD HEALTH CARE ETF||2.49%|
|ISHARES US FINANCIALS ETF||0.51%|
|BLACKROCK TREASURY TRUST INSTL 62 0.190||0.00%|
PMPT Home Page
Here is a comment from Vern Sumnicht, iSectors’ founder and CEO:
“Today’s sophisticated investors understand the need for a more comprehensive approach to their investments, one that aims to perform well in both up- and down markets. Traditionally, investors have been exposed to a buy and hold approach which limits portfolio diversification among highly correlated asset classes, and therefore fails to reduce risk as expected. PMPT diversifies its portfolio among low-correlated asset classes with the goal of minimizing risk, especially in a down market.”
iSectors is an SEC-registered investment advisor that manages a suite of exchange-traded fund (ETF)-based asset allocation models intended for use by registered investment advisors through turnkey asset management platforms. iSectors’ suite of ETF-based allocation models, services, and support empowers advisors with the ability to create and maintain unique investment solutions tailored to each client’s individual investment goals and risk tolerance. iSectors’ proprietary investment strategies seek to improve risk-adjusted returns by employing a number of methodologies, including quantitative analysis, liquid alternatives, strategic and tactical asset allocation.