ALPS Advisors has announced that the ALPS Dorsey Wright Sector Momentum ETF (SWIN US) is to close on 18 October 2018.
The last day of trading in the ETF is scheduled to be 18 October 2018.
Launched in January 2017 on Nasdaq Exchange, the ETF invests in a high conviction portfolio of 50 stocks using a direct replication strategy based on the Dorsey Wright US Sector Momentum Index.
The index was created by Dorsey, Wright & Associates (DWA), an investment advisory firm specialising in relative strength analysis.
The index first determines which sectors within the parent Nasdaq Large/Mid Cap Index universe have the greatest relative momentum by applying DWA’s relative strength formula to the Global Industry Classification Standard (GICS) sector index returns (excluding real estate).
The top three highest momentum sectors are each assigned a 20% weighting in the final index. The ten securities with the highest relative momentum within each sector are selected and are equally weighted for a single-security weight of 2%. The next four highest momentum sectors are assigned a 10% weight in the index with the top five momentum securities within each being selected and assigned a 2% weighting. The strategy excludes the three lowest momentum sectors.
With assets under management of just $10m more than 18 months since the fund’s debut, it has been scheduled for closure and will immediately begin the process of closing down and liquidating its portfolio, which will increase the fund’s cash holdings and likely make it deviate from its stated investment objective.
Proceeds from the fund is expected to be sent to remaining shareholders after the fund’s final liquidation date of 22 October 2018.
The fund appears to be a weak spot in DWA’s otherwise very strong offering. It’s relative strength strategy forms the basis of multiple ETFs across several providers that use the approach at the security, sector, country, and asset class levels.
Among the most successful of these, in terms of AUM, are the $2.3 billion First Trust Dorsey Wright Focus 5 ETF (FV US) and the $1.5 billion Invesco DWA Momentum ETF (PDP US).