AdvisorShares Launches New Business Cycle ETF DBIZ
Pring Turner Capital Group of Walnut Creek, Calif., with $147 million in assets under management, is managing the ETF. It's using an investment strategy it says it's used since 2000 for individual investors called the PTCG Conservative Growth Composite.
It invests in foreign and domestic stocks, bonds, commodities and cash "utilizing its proprietary business cycle research," the ETF prospectus states.
Pring Turner co-founder Martin Pring has written tomes about investing strategies and technical analysis. (One costs $199.95.)
But the ETF's prospectus doesn't give much detail about how it goes about picking its holdings, what the business cycles are nor the stages of the "six-stage" business cycle that typically last four to five years.
The two-page section in the prospectus about the ETF's investing strategy vaguely states that the managers will pick the stocks, commodities, etc. they think will go up the most and avoid the ones that will most likely go down the most during a business cycle. They will buy stocks at the bottom of the bear market and sell at the top of the bull market.
The managers "use a multistep process to build and dynamically manage the fund's portfolio to optimize returns" over the "six-stage" business cycle, the prospectus says. The six stages include three expansionary phases and three contracting phases, according to Pring Turner.
First the managers decide whether stocks, bonds and commodities are in a long-term bull or bear market. Next, they apply three "models" or "barometers," which include "trend following, momentum and inter-asset relationships" to pinpoint the "significant market turning points."
Then they use historical data to decide which sectors will likely beat or lag the market given the stage the market is in.
"For instance, in the deflationary part of the business cycle, consumer staples and utilities may be appropriate sectors to emphasize, and in the inflationary part of the cycle, energy and industrials may be outperformer," the prospectus says.
Managers will also use technical analysis, such as relative strength indicators, trends and charts to pick the best sectors.
Finally, they use fundamental analysis to find stocks with "positive fundamental attributes and dependable income."
PTCG says the model lost 0.72% in 2011, while the S&P 500 gained 2.11%. The model lagged the S&P in 2010 15.31% to 15.36%, lagged in 2009 16.84% to 26.46% and led in 2008 -17.91% to -37%.
Between 2000 and 2011 PTCG says the model's average annual return beat the benchmark by 4.64 percentage points, mainly by losing less during the bear markets.
Direxion, the provider of triple-leveraged and inverse ETFs, closed three niche ETFs Tuesday because of their failure to attract trading interest. The areDirexion Large Cap Insider Sentiment Shares ( INSD ),Direxion S&P 1500 Index Volatility Response Shares ( VSPR ) andDirexion S&P Latin America 40 (DRRC)Index Volatility Response Shares ( VLAT ).
INSD was introduced in late December last year, while the other two were rolled out in early January. With nearly no trading most of the time, very few shareholders if any will be affected.
One Down At IndexIQ
IndexIQ, best known for its hedge fund replication strategies, closedIQ Emerging Markets Mid Cap ETF ( EMER ) on Tuesday. EMER started trading in July 2011 and had only $1.68 million in assets under management.
So far this year, 95 ETFs have closed down, according to Index Universe.