AdvisorShares, the Bethesda, Maryland based firm specializing in actively-managed ETFs, has filed a preliminary prospectus with the SEC for the launch of 3 new actively-managed ETFs in collaboration with Madrona Funds LLC. Madrona Funds is based out of Everett, Washington and was only established as an investment advisor in September 2010. The firm is affiliated with BondStreet Wealth Management, an investment advisor managing in excess of $135 million which has been ranked by Financial Advisor Magazine as one of the top 25 fastest growing companies in its class in the country for 3 consecutive years.
The expenses for the funds have not yet been announced. The managers will employs a forward-looking fundamental investment process when making capital allocation decisions across investment strategies for the funds. The underlying investment process for the two equity funds is based on a measure of forecasted earnings and projected growth relative to the price of the equities. The bond fund is based on fundamental yield curve analysis and a measure of mean reversion for future expected yield curve trajectory. For each fund, the investment committee will meet on a bi-weekly basis to monitor the fund and make allocation decisions.
The 3 planned actively-managed ETFs are as follows:
1. Madrona Forward Domestic ETF (NYSEARCA:FWDD)
FWDD will seek capital appreciation above the S&P500 Index by investing in large US equities. Madrona will select up to 500 securities for the fund by using a weighted allocation system based on consensus analyst estimates of the present value of future expected earnings relative to the share price of each security. Valuation estimates from third party research will be used to drive the proprietary models that will rank the companies from most to least attractive. The managers will have guidelines in place to avoid dramatic over or under-weighting of individual securities.
The fund will likely own all the securities in the S&P500 and is essentially an alternative to cap-weighted indices and cap-weighted index ETFs.
2. Madrona Forward International ETF (NYSEARCA:FWDI)
FWDI will invest in at least 250 of the largest securities traded as ADRs in developed and emerging international countries. The investment committee uses third party analyst research and a proprietary fundamental process to make allocation decisions. Each security selected for the fund will have to have a minimum market cap of $100 million and a monthly trading volume of 250,000 shares. Again, the valuation estimates from third party research will be used to drive the proprietary models that will rank the companies from most to least attractive.
FWDI will appeal to investors looking for exposure to EAFE, Canadian and emerging market companies with weightings that differ from the cap-weighted MSCI EAFE Index and the MSCI Emerging Market Index.
3. Madrona Forward Global Bond ETF (NYSEARCA:FWDB)
FWDB will invest in at least 12 distinct global bond classes through the use of index ETFs that cover each of those classes. The fund will try to outperform the Barclays Capital Aggregate Bond Index. Madrona will use third party research to conduct yield curve analysis and based on the research will determine which bond classes to under or over-weight. Each class will receive a minimum allocation of 3%. The bond classes include the following:
|·||Investment Grade U.S. Corporate|
|·||Inflation Protected Treasury (TIPS)|
|·||High Yield U.S. Corporate|
|·||Convertible and Preferred|
|·||International Investment Grade Corporate|
|·||International High Yield|
|·||Build America Bonds|
This fund is intended to target investors seeking a single bond fund that provides diversified global bond exposure.
Disclosure: No positions in above-mentioned names.
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