Alpha Architect, the investment firm behind the MomentumShares brand, has announced the launch of its fourth actively managed ETF: the MomentumShares International Quantitative Momentum ETF (BATS: IMOM). Listed on the BATS Exchange, the new fund applies the firm’s proprietary quality- and price momentum-oriented investment approach to internationally listed companies trading primarily on developed markets.
Dr Wesley Gray, co-CIO of Alpha Architect.
The algorithms that underpin the fund are the same as those that power the MomentumShares US Quantitative Momentum ETF (QMOM), which focuses exclusively on US exposure.
The underlying concepts were developed by Dr Wesley Gray and Dr Jack Vogel, co-CIOs of Alpha Architect. The pair have an established history of model building, having completed their quantitative value algorithm – a process for identifying over- or undervalued securities based on fundamental analysis – in 2012.
Dr Wesley Gray is appointed head portfolio manager for the MomentumShares International Quantitative Momentum ETF.
Commenting on the launch, Gray said: “We seek to deliver a high-conviction momentum approach backed by extensive academic and market research and a substantive knowledge of the manner in which irrational investor behaviour creates mispricing. With IMOM, we can now give our investors access to this strategy with an international lens. IMOM is a concentrated portfolio and will not track benchmark indices on a tick-by-tick basis in the short run. Investors need at least a longer-term horizon to have a chance at success.”
IMOM will typically invest in approximately 50 international firms that are the highest rated scorers on Alpha Architect’s Quantitative Momentum system. As such, the fund may best be suited for investors looking to incorporate it as a satellite holding within a fund whose core is based upon low-cost index tracking funds. This has the potential to improve portfolio risk-adjusted returns while keeping costs low.
The fund may invest in companies operating in any industry or with any market capitalisation. It may also employ the use of depository receipts to gain the necessary exposure. As of 31 December 2015, the fund holds 46 securities with a roughly equal weighting distribution among constituents; the largest holding is in Kyowa Hakko Kirin (2.5%).
The fund has a total expense ratio of 0.79%.