Main launches active sector rotation ETF

Sep 12th, 2017 | By | Category: Equities

Main Management ETF Advisors (Main) has launched the Main Sector Rotation ETF (BATS: SECT), an actively managed ETF that utilises a fund of funds structure to invest in other sector-based equity ETFs. The launch marks Main’s debut into the ETF provider space.

Main launches active sector rotation ETF

The ETF is currently overweight the health care, financial and technology sectors.

The fund seeks to outperform the S&P 500 Index through dynamic sector rotation based on identifying undervalued sectors poised to respond favourably to financial market catalysts. Main analyses economic growth forecasts, inflation trends and other macroeconomic and capital market fundamentals over a 6-18 month time horizon.

Main then seeks to identify the most appropriate ETFs to implement its strategic asset allocation and sector views by evaluating various factors including underlying indices and portfolio holdings, sector exposure and weightings, liquidity profiles and tracking error.

The current largest sector exposure of the fund is healthcare including biotechnology, which makes up 27% of the portfolio. The other major sector plays are financial and technology with 24% and 23% of the portfolio respectively. The remainder of the fund is made up of sector exposures to US home construction, US metals and mining, and global emerging markets.

Currently, the largest holdings in the fund are the Technology Select Sector SPDR Fund ETF (NYSE Arca: XLK) with 18% of the portfolio, the Health Care Select Sector SPDR Fund ETF (NYSE Arca: XLV) with 16%, and the Financial Select Sector SPDR Fund ETF (NYSE Arca: XLF) with 14%.

The fund has $165 million in assets under management and a gross expense ratio of 1.01%, reduced to 0.65% after a fee waiver in place until 2027.

There are a number of existing sector rotation ETFs available. Investors looking for an ETF with a passive sector rotation strategy could try the First Trust Dorsey Wright Focus 5 ETF (Nasdaq: FV), which was launched in March 2014 and has assets under management of $2.3bn with a total expense ratio of 0.89%. FV provides exposure to five First Trust US sector ETFs selected due to high price momentum according to Dorsey, Wright & Associates’ relative strength methodology.

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