As is the case with other investments, knowing exactly when low volatility is going to be in style amounts to an effort aimed at factor timing and can be a tricky endeavor. Likewise, knowing when higher beta stocks will be favored is a taxing endeavor.
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Welcome To The Market, LVHB
The Elkhorn Lunt Low Vol/High Beta Tactical ETF (BATS: LVHB), which launched Thursday, aims to solve the low volatility/high beta rotation dilemma. As its name implies, LVHB is the latest ETF in the burgeoning lineup of Illinois-based Elkhorn Investments.
Elkhorn was founded by Ben Fulton, formerly of PowerShares. While at PowerShares, Fulton was involved in the creation of the PowerShares S&P 500 Low Volatility Portfolio (PowerShares Exchange-Traded Fund Trust II (SPLV)), one of the largest low volatility ETFs on the market today. In other words, LVHB's low volatility and high beta pedigree is second-to-none.
LVHB's Index And Strategy
LVHB tracks the Lunt Capital U.S. Large Cap Equity Rotation Index, which is based on Lunt Capital's proprietary risk-adjusted momentum strategy and calculated by S&P, according to a statement issued by Elkhorn.
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The Lunt Capital U.S. Large Cap Equity Rotation Index rotates between low-volatility and high-beta stocks in the S&P 500. That is accomplished by the Lunt index being fully invested in the S&P 500 Low Volatility Index and the S&P 500 High Beta Index. That low volatility index is the underlying benchmark for SPLV while the high beta index is tracked by the PowerShares S&P 500 High Beta Portfolio (PowerShares Exchange-Traded Fund Trust II (SPHB)).
LVHB came to market allocated to the high beta index as its top 10 holdings currently mirror those in SPHB.
Adding to LVHB's uniqueness is that the ETF came to market with $50 million in assets under management, courtesy of Utah-based registered investment advisory Soltis Investment Advisors. That immediately makes the new Elkhorn fund one of this year's most successful rookie ETFs.
LVHB, Elkhorn's sixth ETF, charges 0.49 percent per year, or $49 on a $10,000 investment. The firm's other ETFs include the Elkhorn S&P 500 Capital Expenditures Portfolio (CAPX) and the Elkhorn S&P High Quality Preferred ETF (BATS: EPRF).
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