First Trust Enhanced 130/30 Index ETN (JFT)
Loading...
Symbols:
JFT Forum Topics
loading ...Recent JFT Articles
Trading Center
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
A Look at New Asset Allocation and Hedged Equity ETFs [view article]
New asset allocation strategy? Don’t drink the punch! There is nothing new about this asset allocation strategy or methodology; nor is this quantitative based. First, Funds of ETF’s exist, there is nothing unique about an asset allocation fund of ETF’s. Second, New Frontier Advisors, the distribution arm of Nothfield, does not use a quant model to come up with their solution. It’s built on the same platform as all the other archaic asset allocation solutions designed in the 1950’s; what you call Mean Variance Optimization (MVO), Modern Portfolio Theory (MPT), and in some cases its updated versions called Black-Litterman Model (BLM) and Arbitrage Pricing Theory APT), such as you will find in the software offered by Zyphyr Associates.Third, the methodology of resampling was developed by Richard Michaud in 1999 and adds little, if any, value to a generic asset allocation model. It only serves to average efficient frontiers that are based on averages (maybe the fund should be called the average of averages). MVO-Resampling works in 3 steps like this:
Step 1: a) Estimate returns, risk (using standard deviation) and dependency (linear correlation) for a set of assets using historical data. b) Run a Monte Carlo simulation to create a new data set. Calculate the return, risk and the dependency of the new data set.
Step 2: Create an efficient frontier using the new inputs. (Repeat steps 2 and 3 500 times).
Step 3: Calculate the average allocations to the assets for a set of predetermined return
intervals. This is the new efficient frontier (Oh yes, slap a U.S. Patent #6,003,018 on this methodology to make it look new).
In New Frontier’s whitepaper they highlight the ‘Fallacies of Mean-Variance’, yet they still rely on it. Why put a band-aid on a broken model? The REAL NEW STUFF is called Extreme Value Theory (EVT) and firms using this methodology have significantly out-performed your average of averages model. EVT is based on Noble Prize winning concepts from this millennium (2002), not from Markowitz’s work from 1952 & 59’ (yes, 50 years ago). Phillip Anderson, another recent Nobel Laureate in Physics, states “Much of the real world is controlled as much by the “tails” of distributions as by means or averages: by the exceptional, not the mean; by the catastrophe, not the steady drip.” “We need to free ourselves from “average” thinking”. In summary, it’s better than doing nothing…….in a rising market. These models suggest you will earn 10% a year based on 80 years of historical data; the average over that time frame. Note the domestic market is down for the past 10 years; so much for being average.
Reply
A Look at New Asset Allocation and Hedged Equity ETFs [view article]
I own the JFT ETN - it's down a little right now, but the performance has been great and I get access to a basic hedge fund strategy without having to do anything myself.There's even an ETF for private equity now - I think it's PSP. Worth a look if you're in to hedge-fund-like strategies. Reply
A Look at New Asset Allocation and Hedged Equity ETFs [view article]
it looks like they have added outside funds, in PTO as of July 10th:iShares MSCI Emerging Markets Index Fund 4.63%
Vanguard ETF Emerging Markets 4.60%
Reply
Quant Strategy Broad ETFs [view article]
A good article idea ... comparing the performance of the "quant" funds against the major averages. ReplyJackson
Quant Strategy Broad ETFs [view article]
Update: We added the new First Trust 130/30 ETN to the list, and in the Further Reading section a link to an article about it by Murray Coleman, that quotes Roger Nusbaum. ReplyETF Watch: May 23-29 [view article]
I'd be interested to hear if anyone thinks the quant ETFs like the First Trust 30/130 are a threat to hedge funds. They certainly have much lower fees. ReplyEditors
General Discussion on JFT
Is this a buy or a sell? Reply