VanEck launched a new exchange-traded fund with a guided allocation approach designed to help investors manage risk in the U.S. equity market.
The VanEck Vectors NDR CMG Long/Flat Allocation ETF (LFEQ) seeks to track the Ned Davis Research CMG US Large Cap Long/Flat Index, which is a rules-based index that follows a proprietary model developed by Ned Davis Research (NDR) and CMG Capital Management Group (CMG).
“Many investors make an allocation to U.S. equity for the long-term growth potential, but most may not realize that since 1928 the S&P 500 has spent 70% of the time either in a bear market or recovering from one. That’s not a lot of time spent growing new wealth,” said Ed Lopez, head of ETF product management at VanEck, in a statement. “Your experience really depends on where in the market cycle you start investing.”
According to Lopez, LFEQ provides investors with an ETF solution that offers a systematic approach that seeks to preserve capital by increasing cash when market health is weak, and participate in uptrends with a full allocation to equity.
The model produces trade signals that dictate the index’s equity allocation (100%, 80%, 40% or 0%) and/or cash (U.S. T-bills) allocation.
The index’s equity exposure is provided by the S&P 500 index. Cash exposure is provided by the Solactive 13-week U.S. T-bill Index. The index may rebalance intra-month based on signals from the model. LFEQ will allocate to S&P 500 equities (through ETFs initially) and/or U.S. T-bills.
“Our guided allocation solutions are designed to help fill an important need in investors’ portfolios by responding to market downturns,” Lopez said in a statement.
LFEQ has an estimated gross expense ratio of 0.63%, net expense ratio of 0.59%, and is contractually capped at 0.55% through Feb. 1, 2019.
Direxion Changes Index for Small Cap ETF
Direxion is changing the benchmark index of the Direxion Daily Small Cap Bull 1.25X Shares (LLSC) to the S&P SmallCap 600 Index. The modification will take effect on Dec. 1.
The current index is the Russell 2000 Index.