Goldman Sachs and ALPS roll out four proprietary strategy ETFs

Jan 2nd, 2013 | By | Category: Alternatives / Multi-Asset

Goldman Sachs and ALPS have teamed up to launch four exchange-traded funds (ETFs) tracking proprietary Goldman Sachs strategy indices.

Goldman Sachs and ALPS roll out four proprietary strategy ETFs

Goldman Sachs and ALPS have teamed up to launch four ETFs based on proprietary strategies developed by Goldman Sachs.

Three of the new ETFs are based on Goldman’s “Momentum Builder” framework, a systematic trading strategy that dynamically allocates across a basket of assets according to historical price momentum and volatility.

These funds seeks to capture momentum exposure to select asset classes by holding a combination of third-party ETFs that provide the highest six-month historical return, subject to the constraints on maximum and minimum weights and volatility controls.

The underlying universe of eligible third-party ETFs includes funds issued by iShares, SPDR, PowerShares, WisdomTree, Vanguard and Market Vectors.

Unlike traditional momentum strategies, which are typically based solely on historical returns, the funds take into account historical volatilities and correlation to manage the risk of the overall portfolio.

The GS Momentum Builder funds are the ALPS/GS Momentum Builder Growth Markets Equities and US Treasuries Index ETF (GSGO), the ALPS/GS Momentum Builder Multi-Asset Index ETF (GSMA) and the ALPS/GS Momentum Builder Asia ex-Japan Equities and US Treasuries Index ETF (GSAX).

The fourth product, the ALPS/GS Risk-Adjusted Return US Large Cap Index ETF (GSRA), is designed to reflect the performance of an index of US stocks anticipated to have the highest risk-adjusted returns using 12-month volatility-adjusted consensus price targets for the stocks in the Russell 1000 index.

Unlike traditional market-cap-weighted indices, stocks are selected based on the consensus analyst price estimates of US large-cap names adjusted by volatility, while sector exposure is determined through risk parity, in which sectors with lower anticipated risk receive a higher allocation of stocks and higher risk sectors receive a lower allocation of stocks.

Potentially, the combination of both fundamental stock selection and sector risk parity can result in higher returns, a higher return/risk ratio and lower drawdowns than traditional market-weighted indices.

Commenting on the launch Tom Carter, Executive Vice President of ALPS Holdings, said: “ALPS is excited to introduce ETFs based on the Goldman Sachs indices to our suite of ETFs.”

Federico Gilly, managing director and head of the Equity Sales Strats and Structuring Group at Goldman Sachs, added: “This collaboration helps us achieve our shared goal of providing ETF investors with thoughtful index-based investment alternatives with various types of market exposures.”

All four funds have been listed on the NYSE Arca.

Tags: , , , , , , , , , ,

Leave a Comment



More in Alternatives / Multi-Asset
SPDR ETFs: Four principles for building your core portfolio
SPDR ETFs: Four principles for building your core portfolio

By Matthew J. Bartolini, head of SPDR Americas research, State Street Global Advisors. A strong, flexible portfolio depends heavily on how assets are...

Bermstein: Exponential rise in indices spells death of benchmarking
IndexIQ cuts fees for hedge fund ETF

IndexIQ has reduced the management fee charged for its IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QIA) from 0.75% to 0.53%. Including the...

Close