Virtus ETF Solutions, an affiliate of Virtus Investment Partners, has introduced a new exchange traded fund that innovatively shorts exposure to large- and mid-cap US equities without daily rebalancing and, in the process, mitigates swaps-based risks.
The Virtus Enhanced Short US Equity ETF (NYSE: VESH), which is managed by Rampart Investment Management, a Virtus affiliate that specialises in disciplined, systematic, and rules-based investment strategies, may be of interest to investors who have a bearish view of the US market or want to tactically hedge the US equity exposure in their portfolios.
“VESH is structurally different than other ‘inverse’ ETFs because it does not utilise swaps, does not feature a leveraged investment objective, and does not rebalance on a daily basis,” says William J Smalley, executive managing director and head of product strategy and management, Virtus ETF Solutions. “We believe it addresses the structural issues associated with daily-rebalanced, inverse ETFs.”
According to Smalley, VESH seeks to outperform (100) per cent of the total return of the S&P 500 Index by providing inverse (short) exposure to large- and mid-capitalisation US equities. It systematically sells (shorts) listed futures contracts based on the S&P 500 and its sectors according to a proprietary, relative strength momentum methodology that overweights short exposure to sectors that have exhibited the weakest relative strength. As such, VESH marries a classic enhanced beta technique with short selling.
VESH, which is Rampart’s first ETF strategy, is managed by a team that is experienced at implementing hedged equity strategies to complement existing investment strategies and equity exposures. The team includes Warun Kumar, chief investment officer, and portfolio managers Michael Davis, Brendan R Finneran and Robert F Hofeman, Jr.
“VESH demonstrates our commitment to deliver innovative ETF solutions that seek to mitigate risk management challenges in investor portfolios,” says Smalley.