Dent Tactical ETF Will Likely Have Trouble Gathering Assets

Harry S. Dent Jr. is back, and this time he’s got an ETF. The Dent Tactical ETF (DENT) started trading Wednesday (September 16, 2009). It is being offered by a new ETF sponsor called AdvisorShares. Unlike most other fund sponsors, AdvisorShares chose to not include their name as part of the ETF’s name. DENT is an actively managed ETF of ETFs that claims to have five key attributes: proprietary demographic analysis, tactical investment approach, risk mitigation process, management expertise, and active management.

Other attributes include a management fee of 0.95% and a gross expense ratio of 1.56%, which assumes expenses for the “acquired funds” (underlying ETFs) are just 0.17%. The fund has “generously” offered to cap the fund’s net expenses at 1.50% for the next 50 weeks. However, according to the prospectus, this cap excludes interest, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses. It appears to me that this so-called cap is actually a potential elevation of fees. Since the 1.56% gross expense ratio includes 0.17% for “acquired fund fees,” the advisor is essentially capping a 1.39% expense at 1.50%.

“This should create a peak Dow of 21,500” in 2006. “…the more aggressive ratio trajectory is more likely to be the trend. That trajectory would allow for a Dow as high as 35,000” in 2008.

– Harry S. Dent Jr. (1998), The Roaring 2000s

The Dent Tactical ETF website has links to the prospectus, fact sheet, and an educational piece on demographics. Unfortunately, these are only downloadable from the site so I cannot provide direct links here.

As part of its active management, the fund’s website will provide complete holdings every day after the market close. It appears that the fund launched with 11 holdings equally weighted at 8.9% each. First day market action caused iShares MSCI South Africa (EZA) to become its largest holding at 9.17% and Vanguard Europe Pacific ETF (VEA) to become its smallest at 9.01%. The current mix is about 44% domestic, 43% developed international, and 11% emerging markets.

This product has more than its fair share of hurdles to overcome if it is to be economically viable. Not the least of which is that ETF investors have shunned actively managed ETFs. I will not be surprised to see this fund in my April 2010 ETF Deathwatch, after its six-month grace period expires.

Disclosure: No positions

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Comments

[mb2:]

“This should create a peak Dow of 21,500” in 2006. “…the more aggressive ratio trajectory is more likely to be the trend. That trajectory would allow for a Dow as high as 35,000” in 2008.

– Harry S. Dent Jr. (1998), The Roaring 2000s


Boy, he nailed that one....

Sep 17 11:42 AM

[Ricard:]

Dent is a reed that bends in the wind. This is one exceptional reed, as it is able to bend 180 degrees and stick its stem into the ground whenever the situation warrants it.

Dent predicted Dow 40,000 for 2009 back in 2005.

He is now predicting the mother of all depressions in his new book.

He didn't get the first one right, what's to think he's going to get the second one? And now he has an ETF?? LOL...

Sep 17 12:43 PM

[Wayne A. Co...:]

So if he is looking for the mother of all depressions, what will he 'invest' in? Perhaps instead of a prospectus, his investors will receive a mattress with instructions on how to stuff it with their few remaining dollars.......

Sep 17 02:53 PM

[Mafeking:]

Dent is, in fact, an excellent source of prediction regarding the stock market.

Just assume the opposite of what he predicts. So far that strategy has been 100% correct.

Sep 17 02:55 PM

[CoffeeRampage:]

Stocks have several pros and cons associated with them. Stocks are a great option if you know what companies you want to invest in. They are also a great option if you are interested in day trading. While stocks offer you flexibility and control over the diversity of your investment portfolio they require a lot of work to keep your portfolio properly diversified. A lot of financial experts recommend that your investment portfolio contain investments in at least 20 different companies and in at least 10 different industries. Making this many stock selections can be difficult to do.

Mutual funds are another investment option that you have. A mutual fund is basically an investment set that is controlled by a financial management company. This management company selects the stocks, bonds and other investments that are held by the mutual fund. Mutual Funds are a great way to easily diversify your investment portfolio. The management company does all of the leg work for you. While mutual funds are a great investment option they do have a few drawbacks. The first drawback is that they charge management fees and carrying fees. These fees cut into your profits and investment capital. The second drawback is that the performance of the mutual funds depends partially on the management company’s ability to select good investments and the company’s ability to manage the fund’s investment portfolio. Another drawback to mutual funds is that you don’t have any say in which investment products the mutual fund invests in. Because of this the fund may invest in a company that you would prefer not to invest in, or they may select an investment product that you think is a bad investment. Finally, mutual funds are susceptible to fraud. In recent years there has been several high profile fraud cases filed against mutual fund management companies.
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www.topinvestingtips.com

Sep 17 05:05 PM

[Steve Pasq:]

Dent's theory makes a lot of sense. His 1996 call for a 500% run in stocks over the next 10 years was off a little since they only went up 350%. But he has hopefully refined his forecasting tools over the past 14 years.

The holdings in his fund surprise me because it contains the XLF which I thought he would be short now since he predicts a collapse towards the end of 2009. Maybe he is a reed in the wind.

Sep 17 06:49 PM

[Ron Rowland:]

Steve, according to one of the other comments above it appears his refinement came in 2005 when he upped his prediction to "Dow 40,000 in 2009". There are still more than three months to go in 2009 to pull this one off.

By the way, I am the first on record to predict Dow 1,000,000 (Dow One Million). In the July 1997 issue of my newsletter I stated that everyone had caught Dow prediction fever. My target date was 2050 (which will require an 11.9% average annual gain from here). I guess it's time to revise my forecast. Next time I'll be sure to use a date that's guaranteed to be long after I am dead so I won't hear them laughing at me at Seeking Alpha.

Sep 17 07:28 PM

[Adam Sharp:]

"By the way, I am the first on record to predict Dow 1,000,000 (Dow One Million). In the July 1997 issue of my newsletter I stated that everyone had caught Dow prediction fever. My target date was 2050 (which will require an 11.9% average annual gain from here). I guess it's time to revise my forecast. Next time I'll be sure to use a date that's guaranteed to be long after I am dead so I won't hear them laughing at me at Seeking Alpha."

I hereby one-up you, on the record. My prediction is Dow $1.96b in 2241. A soda will cost our great-great-great-gran... ~$765,000, but we will all be billionaires!

Sep 18 01:11 AM