Main Management ETF Advisors has unveiled the Main Thematic Innovation ETF (TMAT US), an actively managed strategy that uses a fund-of funds structure to tactically rotate between thematic ETFs targeting disruptive technologies.
Top thematic exposures currently invested in by the ETF include solar, genomics, robotics, and fintech.
The fund, which has listed on Cboe BZX Exchange, seeks to outperform the MSCI ACWI Index by investing in themes with large addressable markets, ranging from nascent technologies to those on the cusp of widespread adoption.
Main notes that the market has often failed to price disruptive technology companies appropriately. It says that disruptors continually reinvest in their future and expand their reach as they grow and that these moves are hard for markets to accurately price, resulting in the potential for mispricing opportunities.
According to Main, it may take several years for a theme to mature and the pricing disequilibrium to normalize. Given the longer-term nature of thematic development, an automatic monthly or quarterly rebalancing policy could be counterproductive and, as such, the ETF is expected to have long-term holding periods for its underlying ETFs.
The fund’s portfolio managers set price targets for each underlying thematic ETF, revisiting positions when the price target is met and revising upwards when deemed appropriate or selling if it is believed that the theme has either run its course or is no longer likely to provide further exposure to disruption or innovation.
Price targets are set based on the pairing of top-down research examining broad macro-economic growth drivers with more industry-specific analysis focused on consumer behaviour, technological developments, and regulation.
Top holdings in the ETF include the Invesco Solar ETF (TAN US), at 17%; the ARK Genomic Revolution ETF (ARKG US), 11%; the ARK Autonomous Technology & Robotics ETF (ARKQ US), 10%; the ARK Fintech Innovation ETF (ARKF US), 9%; and the Proshares Online Retail ETF (ONLN US), 9%.
Other themes currently targeted by the ETF include pet care, video gaming & eSports, cybersecurity, and cloud computing.
According to the prospectus, the fund may occasionally utilize covered call or covered put option strategies in a bid to dampen volatility and generate additional returns.
TMAT comes with a punchy expense ratio of 1.65%, though this includes the cost of investing in the underlying ETFs.
The fund is Main’s second ETF following the launch of the actively managed Main Sector Rotation ETF (SECT US) in September 2017. SECT seeks to outperform the S&P 500 by dynamically rotating between various US sector and industry-specific ETFs. It houses $660m AUM and comes with an expense ratio of 0.80%.