VanEck has introduced the VanEck Vectors NDR CMG Long/Flat Allocation ETF (NYSE Arca: LFEQ). Launched in collaboration with Ned Davis Research (NDR), the fund provides exposure to US large-cap equities through a guided allocation approach designed to help investors participate in bull markets and minimise losses in bear markets.

The ETF seeks to give investors full exposure to equities during bull markets but move a proportion of the portfolio to cash during bear markets.

LFEQ tracks the Ned Davis Research CMG US Large Cap Long/Flat Index that follows trade signals to determine its equity allocation (100%, 80%, 40% or 0% allocation to the Vanguard S&P 500 ETF (VOO)). When equities are less than 100% of the index, the remainder is made up of cash through exposure to the Solactive 13-week US T-Bill Index.

Ed Lopex, head of ETF product development management at VanEck, commented: “Many investors make an allocation to US equity for the long-term growth potential, but most may not realise that since 1928, the S&P 500 has spent 70% of the time either in a bear market or recovering from one. That’s not a lot of time spent growing new wealth.

“Your experience really depends on where in the market cycle you start investing. LFEQ provides investors with an ETF solution that offers a systematic approach that seeks to preserve capital by increasing cash when market health is weak and participate in uptrends with a full allocation to equity.”

The index follows a rules-based model that uses technical analysis to measure US equity market health and produce trade signals to guide the index’s equity allocation. The model first applies price-based trend and mean reversion indicators to S&P 500 index industry groups to produce a market breadth composite between 0-100 to indicate the level of bearishness or bullishness.

A market breadth composite below 50 equals 0% equity, between 50-60 equals 40% equity, between 60-70 equals 80% equity and above 70 equals 100% equity. The index is currently 100% in equities and has been either 100% or 80% equities for the whole of 2017 so far.

The fund has a total expense ratio of 0.59%.