Michigan-based Q3 Asset Management has made its ETF debut with an actively managed absolute return fund that dynamically allocates across asset classes in a bid to provide a positive return regardless of market conditions.

The ETF dynamically allocates across asset classes in a bid to provide an absolute return regardless of market conditions.

The Q3 All-Season Active Rotation ETF (QVOY US) has been listed on Cboe BZX Exchange with an expense ratio of 1.10%.

The fund invests in third-party ETFs across four asset categories – core equities, active equities, bonds, and alternative assets – generally holding 12 to 14 positions at any point in time.

For each category, Q3 AM maintains an investable universe of eligible ETFs based on multiple factors such as performance, risks, liquidity profile, and AUM, among others.

The core equity category comprises index-based ETFs that target traditional equity style boxes such as large, mid, and small-cap as well as growth and value; the active equity category comprises smart beta ETFs as well as funds that focus on particular sectors or sub-sectors of the economy; the bonds category comprises ETFs tracking Treasuries, corporate bonds, short-term bonds, and municipal securities; and the alternatives category comprises ETFs that focus on currencies, commodities, precious metals, real estate, or master limited partnerships.

Q3 AM establishes fixed target weightings for each category based on an assessment of risk measures. ETFs within each category are selected based on a proprietary, rules-based analytical approach for identifying funds that have exhibited recent relative performance strength. ETFs within each category are generally assigned equal weights.

Q3 AM notes that the portfolio will be evaluated on a weekly basis with annual turnover anticipated to be between 1000-1500% which will result in significant transaction costs for the ETF.

As of 11 January, the ETF’s top allocations were to the VanEck Oil Services ETF (14.0%), SPDR Industrial Select Sector ETF (13.8%), Schwab US Large-Cap Value ETF (13.4%), VanEck Gold Miners ETF (13.3%), Vanguard FTSE Emerging Markets ETF (13.2%), and SPDR DJIA Trust (12.9%).