Blair Hull, one of the veterans of quantitative trading on the Wall Street, recently entered the exchange-traded fund industry in association Exchange Traded Concepts – a white label ETF service provider.
Hull’s actively managed fund uses hedge fund like proprietary trading strategies with an aim to give superior returns to the broader investor community.
Blair Hull, along with his partners, started the highly successful Hull Trading Company in 1985 and 14 years later sold the firm to Goldman Sachs for $531 million. Needless to say, Hull was one of the brightest minds in quant and his company among the most successful derivatives trading firms of his time. Incidentally, Hull had dabbled in politics and unsuccessfully contested the Democratic primary against Barack Obama in the Democratic Primary for the US State Senate in 2004.
Hull’s timing to enter the market may just prove right as investors’ opinion about the economy and the direction of interest-rate movements seem to be divided. His first exchange traded product, the Hull Tactical US ETF (HTUS), is designed to perform independent of market’s direction and is gaining increasing favor with investors across the board.
HTUS’ investment strategy closely resembles Managed Futures, which involves taking both long and short positions in assets that exhibit strong positive or negative trends in order to take advantage of sharp market movements.
The new fund uses long, short and leveraged positions that involve taking exposure in the benchmark S&P 500-tracking ETFs, index related futures and up to 10 percent of its total portfolio in leveraged or inverse ETFs related to the S&P 500 index. HTUS can take 200 percent long position in the S&P 500 index while short positions are capped at 100 percent of net assets.
It can also hold significant amount of cash; as of July 24, the portfolio comprised of 60.07 percent of S&P 500 SPDR ETF (SPY) while cash covered the rest. While target allocations for various asset classes are modified daily, the model’s indicators are re-calibrated every 20 days using more than a decade of historical data.
By using advanced algorithms, macro and technical indicators, it targets to outperform an index comprised of 60 percent stocks (the S&P 500 index) and 40 percent 3-month T-Bills.
Market indicators that are deemed to best predict the S&P 500’s performance over the next six months drive the model underlying HTUS.
The new fund is likely to find favor with investors seeking exposure in the liquid alternative asset class. It may be able to protect investors from steep market declines if the indicators underlying the proprietary model manage to predict market movements accurately.
The annual expense ratio for the new fund is 1.00 percent.
Disclosure: No holdings
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