The Huntington US Equity Rotation Strategy ETF (HUSE) seeks to achieve capital appreciation in excess of the broad S&P Composite 1500 index that includes large-, mid-, and small-cap companies and may be suitable for long-term investors. The fund’s weight exposure to domestic companies depends upon the manager’s, Huntington Assets Advisors, outlook on different sectors in changing market conditions. Huntington Asset Advisors currently manages 26 mutual funds with over $3 billion in assets.
The investment philosophy is relatively simple; managers will try to identify the most promising and the least promising sectors from the S&P Composite 1500 comprising of utilities, consumer staples, consumer discretionary, information technology, industrials, energy, healthcare, financials, materials and telecommunication services.
The S&P 1500 Composite consists of the S&P 500, 400, and 600 indexes and industries/sectors will be overweighted /underweighted based on a top down analysis.
The fund will consider current business cycles, earnings growth potential, valuation and individual financial statements before seeking exposure. Extensive technical analysis will also be done before portfolio changes are made. Allocation to an individual industry will be capped at 25 percent while a single company may be represented in more than one industry at a time. According to the managers, the fund may witness moderate to heavy price volatility.
As of the first week of August, the fund was heavily tilted towards highly liquid large-cap stocks with the pharmaceuticals sector being overweight containing familiar names like Johnson & Johnson, Pfizer, Merck and Abbot Laboratories appearing in the top seven holdings. Apple, ExxonMobil and AT&T are the other holdings in the top seven. According to Morningstar, nearly 75 percent of the portfolio consists of giant and large-cap stocks with the remainder allocated to mid caps.
Since actively managed ETFs are required to disclose portfolio changes immediately, the management’s ability to outperform the market through stock or trade execution is seriously compromised that often results in a liquidity driven portfolio, i.e. transparency hampers active management strategies. HUSE has an initial expense ratio of 0.95 percent.
At this point, the Net assets are tiny ($3.8m), which makes this ETF not a valid investment choice at this point; however, I will track it over the longer term to see if this approach has any merit.
Disclosure: No holdings