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Blue Sky’s QuantX ETFs are designed to absorb portfolio shocks


US-based QuantX Funds has raised USD200 million since January this year for its family of five ETFs, four of which are tailored to provide broad asset class exposure with protection from sustained drawdowns during bear markets. They can also be used as portfolio building blocks to help investors achieve a broad range of objectives or risk tolerance.

Managing Partner Keys Tinney explains that the firm grew from a separate account manager into an ETF sponsor by breaking its separate account strategies into their component parts and packaging them into ETFs to make them easy to invest in and to take advantage of the tax-efficiency aspects the ETF wrapper provides investors in the US.

In addition to the four risk managed funds, QuantX also pioneered a Dynamic Beta US Equity ETF (XUSA) that is the first ETF of its kind to use forward looking option market data to select securities from the Russell 1000 that have best upside vs downside potential. 

“We have had a great response from advisers,” Tinney says. “These products are designed to provide broad asset class exposure but with built-in risk management just in case the markets get choppy. Our goal is to manage drawdowns and provide investors with more consistent returns across a complete market cycle. There’s no more important time than now to help to ensure your portfolio is protected than in what would appear to be the tail end of the bull market we’ve seen for the past nine plus years. Income-oriented investors also need to be able to navigate rising interest rates.”

Looking forward to 2018, Tinney sees more demand for products that provide additional protection above and beyond traditional diversification.  “The further we get from 2008 correction, the closer we are to the next one. Although we can’t predict when the next bear market will occur, we aren’t alone in thinking that it is inevitable.  When the markets do mean revert from their current all-time highs, we hope to be well-positioned to help to protect investor capital.”

David Varadi, (pictured) Director of Research at the firm, says, “Generally speaking we are looking at protecting people against large and protracted drawdowns – this includes recession risk and large corrections  but we can’t protect against shock risk such as a ‘flash crash’ that can occur over a few days or a week.”

Tinney says “Markets might still continue to go straight up but at some point, that tide is going to go out, and we’ll be there to there to lighten the load a bit, protect capital and help investors sleep more soundly.”

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