AdvisorShares -- the leader in actively managed ETFs -- teamed
up with Roger Nusbaum of the "Random Roger" stock market blog in
rolling out a new ETF Tuesday:AdvisorShares Global Alpha &
Beta ETF (
RRGR
).
Nusbaum, the ETF's sub-advisor, is chief investment officer of
Phoenix-based Your Source Financial, with $148 million in assets.
He is a regular contributor on TheStreet.com.
The new ETF uses a go-anywhere tack. The prospectus states he
will use a top- down view in investing in bonds, money market
instruments, mutual funds, ETFs, stocks of any size and foreign
companies listed in the U.S.
The investment strategy involves overweighting sectors that
Nusbaum expects will perform well. He will also underweight those
he thinks will lag. And he will diversify across industries and
countries.
He will sell stocks or ETFs that are fully valued, become
risky, get overweighted in the portfolio or simply because he
finds something that he likes better.
If the S&P falls below its 200-day moving average or if
the yield curve is inverted, the fund will take a defensive
position. An inverted yield curve means that long-term debts are
yielding less than short-term debts of the same credit quality.
Demand for long-term bonds is higher than short-term, sending
yields lower and prices higher. When that happens, it suggests
the economy will go into a recession.
Roger's Rabbit
The fund seeks to outperform a benchmark that has 60% of its
assets in the S&P 500 and 40% in Barclays Capital Aggregate
Bond Index but with less volatility and risk, an AdvisorShares
release said.
"That is clearly, absolutely, undeniably the wrong benchmark,"
to compare the strategy's performance against, said Rick Ferri,
founder of Portfolio Solutions. "Of course the back testing is
going to show outperformance because international markets and
especially emerging markets have outperformed the U.S. over the
past 10 years."
Performance should be measured against a global equity index
and a global bond index, he added.
As of Tuesday, RRGR had 50% of assets invested in U.S. stocks,
24% in foreign stocks, 12% in cash, 9% in emerging markets and 4%
in commodities. Top holdings areiShares Dow Jones U.S. Technology
(
IYW
), weighted 15%; cash 12%;Vanguard Telecom Services ETF (
VOX
) 4%,H.J. Heinz (
HNZ
)3.04% andKinder Morgan Energy Partners (
KMP
) 3%.
The prospectus claims Nusbaum has applied the same investing
strategy in running separately managed accounts since July 2004.
It states those accounts gained 9.43% in 2005, 13.77% in 2006 and
10.9% in 2007. Then it lost 27.7% in 2008, returned 26.58% in
2009, gained 13.48% in 2010 and lost 2.96% in 2011. Returns
averaged 6.21% annually over those years.
The S&P 500 returned 4.91% in 2005, 15.79% in 2006, 5.49%
in 2007 and lost 37% in 2008. It rose 26.46% in 2009, 15.06% in
2010 and 2.11% in 2011, according to Morningstar Inc. It gained
4.69% annually on average those years.
Nusbaum beat the benchmark by an average of 1.52 percentage
points annually between 2005 and 2011. Returns in excess of the
benchmark would be mostly washed away by the ETF's 1.4% net
annual management fee. The gross fee is 1.72% with a 0.32% waiver
that can be cancelled at any time.