AlphaClone, the investment advisor behind the innovative AlphaClone Alternative Alpha ETF (ALFA), has launched an ETF tracking their latest equity index of “best ideas” cherry-picked from the portfolios of established hedge fund managers.
Maz Jadallah, CEO of AlphaClone.
The AlphaClone International ETF (ALFI) tracks the AlphaClone International Downside Hedged Index that was unveiled earlier this month.
According to AlphaClone, by accessing the investment ideas of the world’s most established hedge fund managers, the ETF seeks to give investors the potential to outperform broader international markets while simultaneously hedging against protracted market downturns.
“Following a similar methodology used inside separately managed accounts since 2010, we’re excited to offer an international ETF to help long-term investors navigate international opportunities,” said Maz Jadallah, CEO of AlphaClone. “Our approach seeks to combine the best of man and machine by leveraging the most established investors while offering a rules-based investment methodology.”
The fund follows the same methodology used in the AlphaClone Hedge Fund Downside Hedged Index, which has approximately $170m in assets currently tracking it, and has returned an average of 14.35% per year versus 12.40% for the S&P 500 Total Return Index over the three-year period ending 30 October 2015.
“Pursuing the potential for alpha is even more important today for long-term investors given the anaemic growth forecasted for equities and bonds over the next several years,” Jadallah continues. “Our strategies seek to offer long-term investors the ability to pursue alpha but with the benefits of a passive investment vehicle.”
The constituents of the fund’s underlying index are derived from holdings data from large institutional investors who are, by law, required to declare their holdings on a periodic and lagged basis. Using this portfolio data from established equity fund managers, AlphaClone use a proprietary scoring model to determine how effective particular investment managers have been in the past. The high conviction holdings of the highest scoring managers are then aggregated to create an index of at least 40 constituents. A dynamic hedge mechanism is also employed that allows the index to vary from long only to market hedged when the S&P 500 closes below its 200-day simple moving average at any month’s end.
As of 10 November 2015, the fund’s largest holdings included Baidu (15.7%), Teva Pharmaceutical (5.2%), Shire (5.2%), Qunar Cayman (5.1%) and JD.com (4.8%).
Listed on the NYSE ARCA, the fund carries a 0.95% total expense ratio.