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Merlyn.AI launches tactical growth and income ETF


Merlyn.AI Corporation (MAI), a Palo Alto-based provider of exchange traded funds, has launched SNUG, a Tactical Growth & Income ETF, on the NASDAQ stock exchange. The Index employs advanced signal processing, adaptive momentum filters, and integrated bear market strategies that enable SNUG to automatically adjust to the ever-changing character of the markets.

“Most investors want some of their portfolio in a conservative instrument that improves returns in both bull and bear markets,” says David Epstein, MAI CEO and Co-founder. “SNUG seeks to do just that.”

Each month, the MAI Tactical Growth and Income Index (which SNUG exclusively tracks) evaluates more than 400 US ETFs across broad and divergent markets and selects a portfolio of eight diverse ETFs. During bull markets, SNUG targets a conservative portfolio’s allocation of 30 per cent equities and 70 per cent bonds. During bear markets, SNUG automatically moves to defensive positions, holding up to 100 per cent in treasuries, bonds, gold, and other defensive ETFs.  

“SNUG is a paradigm shift in ETF design,” says Sue Guzman, MAI COO. “Its index seeks to provide an automated, self-contained tactical portfolio management system in a tax-efficient ETF wrapper that is designed to deliver the five things investors want most.”

According Guzman, those five things are: a portfolio of momentum leaders in bull markets; a portfolio of defensive leaders in bear markets; an expert automatic method for switching between bull and bear portfolios; the benefits of tactical trading without abandoning tax-efficiency; and, perhaps most importantly, the automation of important investment decisions so investors can focus on enjoying life.

SNUG’s integrated design may enable ordinary taxable accounts to enjoy the benefit of tactical trading without abandoning tax-efficiency. Like many ETFs, it employs the IRS ‘in-kind exchange’ rule [Section 852(b)(6) of the tax code] to make most trading within its ETF wrapper a non-taxable event.

“Investing well requires simultaneously solving multiple problems. While the industry remains focused on neural networks and the belief that one AI tool can solve everything, SNUG takes a divide-and-conquer approach by using the best tool for each job,” says Scott Juds, MAI Co-founder and Chief Science Officer. “SNUG employs multiple AI tools that seek to eliminate hindsight bias, analyse multiple market indicators, assess the market’s bull vs. bear status, and genetically evolve its underlying strategies as it learns market behaviour.”

According to Juds, risk is not a one-dimensional problem cured by a single dose of diversification. Traditional diversification’s passive risk reduction is only just a start. SNUG’s index additionally seeks to avoid bear market losses by assessing US markets across key metrics, including price-trend, market momentum and value sentiment. When a bear market is indicated, SNUG’s index automatically switches to a portfolio of defensive leaders that seek to avoid bear market losses.

The MAI Tactical Growth & Income Index is the result of more than 30 years of research and development by Juds, who discovered trends in market data using advanced signal processing in early 1992. Juds has been refining his system through many bull and bear markets ever since. This new approach, branded Temporal Portfolio Theory, has been fuelling the success of Juds’ SumGrowth Strategies LLC in Seattle, WA, which for more than a decade has had strong subscription support from both individual investors and financial professionals around the country. To improve investing simplicity and provide tax efficiency, Merlyn.AI Corporation was formed to commercialise indexes using this approach as ETFs.

SNUG joins WIZ, an 80/20 growth allocation ETF of similar design, launched by the company in October 2019. Together, SNUG and WIZ provide the means to target an allocation blend anywhere along the spectrum, from conservative to growth, and better serve the specific needs of each investor. 

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