AdvisorShares has filed a preliminary prospectus for the TrimTabs Float Shrink ETF (TTFS), an actively-managed ETF that will be sub-advised by Trim Tabs Asset Management. AdvisorShares had previously announced its partnership with TrimTabs on Jan 11. TrimTabs is well-known for its research focusing on equity market liquidity, which is also utilized by the firm’s asset management practice on the advisory side to implement liquidity-based investment strategies. The potential for liquidity analysis to work comes from the fact that most investors tend to ignore the supply and demand side of the equation and hunt mainly for value or momentum.
The Float Shrink ETF will utilize a similar approach based on liquidity analysis. The actively-managed ETF will invest in U.S. equities, as represented by the Russell 3000 Index, by focusing on stocks with liquidity and fundamental characteristics that are historically associated with superior long-term performance. TrimTabs will rank stocks in the Russell 3000 based on three criteria:
- The decrease in their outstanding shares over the past 80 days.
- The increase in free cash flow over the past 80 days.
- The decrease in leverage over the past 80 days.
The above criteria basically stem from the advisors' investment philosophy about supply and demand being important indicators for stock value. As such, companies that shrink the amount of floating shares consistently, through things like stock buyback programs, should consistently outperform. The second criteria emerges from the belief that float shrink is most meaningful from companies that are shrinking their float because their free cash flow is growing. Lastly, the third criteria emerges from the belief that companies which use debt to repurchase shares do not perform as well as those that fund their share repurchases through internal cash flows (i.e. without increasing their leverage).
The three criteria feed into an algorithm that places a higher weight on the float shrink ranking, followed by the free cash flow ranking, and then the leverage ranking. The fund invests in the tenth percentile of stocks with the highest combined ranking.
The portfolio managers for the fund will be Charles Biderman, Portfolio Manager and Chief Executive Officer, and Vincent Deluard, CFA, Portfolio Manager and Executive Vice President. The Float Shrink ETF will be benchmarked against the Russell 3000 Index and will look to deliver superior returns with lower volatility. The expenses to the fund have not yet been announced.
Expenses Reduced on Cambria Global Tactical ETF (GTAA)
AdvisorShares also issued a press release which announced that it is going to lower the expense cap on the Cambria Global Tactical ETF (GTAA: 25.60 +0.67%), effective Feb. 1, 2011. The original net expenses for the fund were 1.35%, after a pre-existing fee waiver. The press release indicated that the net expenses of the fund will now be reduced to 0.99%, thereby benefiting the numerous investors that have together put about $72 million into the fund since its launch less than three months ago. The fee waiver will be in place until Sept. 12, 2011.
Noah Hamman, the CEO of AdvisorShares, said: “AdvisorShares and Cambria made a commitment to lower ETF fees as assets grew and operational efficiencies were achieved. In the three months since GTAA launched, it has been one of the fastest-growing actively-managed ETFs, and it has attracted over $72 million in assets as investors have quickly embraced the GTAA investment strategy.” Hamman also indicated that similar expense reductions can be expected for AdvisorShares’ other actively-managed ETFs as they hit their targeted asset growth.
Launch of Active Bear ETF (HDGE) coming up
AdvisorShares also made a filing to register the securities of the Active Bear ETF (HDGE) on Jan. 20. This registration is usually done just prior to the launch of the fund on the market, so we can expect the very first short-only Active ETF to hit the market very soon.
Disclosure: No positions in above-mentioned names.
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