New Russell 2000 High Beta ETF (SHBT) Started Trading

The ETF Daily News reports that “Russell To Begin Trading The Russell 2000 High Beta ETF (SHBT) Friday, May 27:

Russell will begin trading its new “Russell 2000 High Beta ETF” (NYSE:SHBT) Friday May 27, 2011. The Fund seeks investment results that closely correspond to the total return of the Russell-Axioma U.S. Small Cap High Beta Index.

Total Annual Fund Operating Expenses: 0.69%

Principal Investment Strategies of the Fund

The Fund is an index-based exchange-traded fund that seeks investment results that closely correspond to the total return of the Russell-Axioma U.S. Small Cap High Beta Index (the “Index”). RIMCo uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. Unlike many investment companies, the Fund does not try to “beat” the Index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued. The Fund seeks to gain exposure to the factor exhibited in its Index. The Fund’s investment objective and the index upon which the Fund seeks to track its performance may be changed without shareholder approval.

The Index is designed to deliver exposure to stocks that are predicted to have a high beta as determined by a screening and ranking methodology applied to the output of the Axioma U.S. Equity Medium Horizon Fundamental Factor Risk model. Beta is a measure of the sensitivity of a stock’s price to a change in the broad market price level, as represented by the Russell 2000® Index (an index comprised of U.S. small capitalization stocks). High beta stocks are considered to have a higher risk profile than the overall market and can be used by investors to adjust beta exposure in a portfolio.

Obviously, high beta means high risk, and it appears that this ETF is not for the faint of heart. Once it has established itself, and volume and price figures are available for a few months, I will revisit SHBT again.

From the description above, it’s very clear to me that using this ETF in the current environment of a very tired looking bull market can be extremely hazardous to your financial health, if you invest in it without the use of a trailing stop loss or any kind of exit strategy.

Disclosure: No Holdings


About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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