Victory Capital has launched a new actively managed ETF providing exposure to a seasoned US sector rotation strategy.

Mannik Dhillon, President of VictoryShares.

The VictoryShares WestEnd US Sector ETF (MODL US) has been listed on Nasdaq with an expense ratio of 0.48%.

The fund is managed by Victory Capital’s affiliate, WestEnd Advisors, an institutional asset management firm and registered investment advisor based in Charlotte, North Carolina.

The ETF replicates WestEnd’s existing US sector strategy which, since its inception in January 2013, has notably outperformed the S&P 500 with an annualized return of 14.15% (compared to 13.00%) and lower annualized volatility of 14.10% (15.24%). Data as of the end of Q2 2022.

The strategy typically involves the selection of four to six US large-cap sector ETFs based on WestEnd’s evaluation of the macroeconomic and market environment. The approach combines high-conviction active management with the diversification of investing in passive index-based sector ETFs while actively avoiding select sectors to help mitigate risk.

WestEnd’s process starts with an in-depth analysis of the macroeconomic environment to anticipate areas of strength and weakness. The investment team then considers each sector’s relative economic sensitivity in conjunction with its macroeconomic outlook in making sector allocation and avoidance decisions.

Any sector ETF in the portfolio will be capped at a maximum weight of 35% to promote diversification, while turnover in the portfolio is expected to be relatively low.

As of 14 October, the strategy was allocating to seven ETFs with the most notable exposures being health care (29.2%), information technology (26.7%), communication services (12.2%), consumer staples (10.2%), and consumer discretionary (9.6%).

Mannik Dhillon, President of VictoryShares, said: “We are incredibly excited to offer this time-tested approach to managing model-based strategies to our clients in an active, transparent ETF wrapper which provides ease of trading, lower account minimums, and tax efficiency, among other benefits. By expanding our suite of available vehicles, we are providing financial advisors the flexibility to choose how they access proven investment capabilities for their clients’ varying needs.”

Mike Goldman, Managing Partner at WestEnd Advisors, added: “We are pleased to broaden investor access to WestEnd’s US sector strategy with the launch of this ETF which employs our existing approach and belief that sector performance is tied directly to the path of economic growth. In WestEnd’s view, actively allocating to sectors in their economic time and avoiding those facing headwinds can offer the opportunity for outperformance throughout the economic cycle.”