An actively managed passive ETF is currently enjoying top performance with its quantitative-based volatility trading algorithm fuelling returns.
Dom Catrambone (pictured), CEO, Whitford Asset Management explains that his background is in developing managed accounts and hedge funds.
“I noticed that when you had a product and it had nominal returns that were consistent, no one left the fund, but a fund that did incredibly well but had a bad year, losing a considerable amount of money – people will flee from that.”
Catrambone was looking for a strategy with consistent returns and a number of years of research led to the development of the Volshares Large Cap ETF (VSL). VSL seeks to outperform the S&P 500 by utilising a quantitative trading algorithm which takes market sentiment and short-term price movements into account.
The fund uses the algorithm to measure the performance of an equal-weighted portfolio of 25 large cap, US listed companies weekly, helping to determine a company’s volatility level relative to their likelihood of capital appreciation.
The ETF launched in February 2018 and just over a year in, Catrambone reports that they are the best performing large cap ETF in the US, with returns of 24.08per cent last month, 26.88 per cent year to date, against the S&P 500, which has a year to date return of 14.89 per cent.
“Our trading model gives you the best shot of making a return in the current week and produces a forward-looking projection for what is coming in the next week,” Catrambone says.
“I have been doing this for five years and we are seeing things happening in the current week that you would never see unless you utilised our research model of securing big data and then implementing it into our trading model so it helps us stay on top of what we think the future would be.”
The upside capture ratio over the last three years for the trading model is 119.80 per cent on the upside and 70.6 per cent on the downside. “We are saving people roughly 29.4 per cent on the downside, while they are still getting more on the upside,” Catrambone says.
The fund’s Sharpe Ratio is .92 and the TER is 0.65 per cent.
Catrambone believes that this fund would suit endowments, pension funds, individual retirement accounts and anyone that is looking to produce alpha inside their current portfolio.
He believes that this ETF offers diversification into alpha. “If your portfolio is 40 per cent in equities, I would suggest half or 40 per cent of that half should go into my product which will keep you in the market, help you get alpha and protect alpha.”
