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Armor Index ETFs founder and President Jim Colquitt couldn't have planned the timing of his firm's first ETF launch any better if he had had a crystal ball. Commencing trading on February 11 of this year - just one week before U.S. markets made all-time highs - the Armor US Equity Index ETF (ARMR) has become available to investors at what seems like the perfect time.
Having spent 20 years working as a jack-of-all-trades in the asset management space - including for some of the largest firms in the U.S. by AUM, Jim decided a few years back that he wanted to pursue his dream of running his own unique fund strategies. Drawn to the "math-ier" side of investing from early on, he devised a strategy to capture the U.S. equity market's long-term returns but with significantly less volatility and smaller drawdowns during market sell-offs - like the COVID-19-induced one we're currently in.
The result was the Armor US Equity Index and accompanying ETF (ARMR). The fund holds the sectors of the US equity market - via sector-focused ETFs - that the underlying momentum-driven algorithm deems most likely to generate positive returns, omitting any sectors that don't make the cut. The process is repeated monthly, with a full re-allocation taking place - including out of stocks entirely and into Treasuries (as is the current case).
As Jim puts it, "I have always believed that the key to long-term investing success is avoiding the big losses most investors experience throughout their lifetimes." The index underlying ARMR has more than 20 years of back-tests showing how the strategy has worked throughout several market cycles. March 2020 - the first full month the fund traded - was no exception with significant outperformance versus the benchmark S&P 500. And while only time will tell whether this strategy is able to live up to its promise of full equity returns with less risk, ARMR is certainly off to an auspicious start.
Show Notes
- 2:45 - Jim Colquitt's Background: Why he got into investing and how he ended up where he is today.
- 7:15 - Why Jim struck out on his own and founded Armor.
- 10:45 - Assessment of the market's reaction to the COVID-19 pandemic.
- 17:15 - Armor US Equity Index ETF (ARMR): What is the fund's overarching strategy and how does it achieve this?
- 22:30 - Cases where ARMR isn't invested in equities at all (IEF).
- 28:15 - Which is more important, avoiding losses or not missing gains?
- 33:30 - Is a once a month re-allocation sufficient in highly volatile markets like the current one?
- 35:30 - Does the monthly trading lead to unwanted tax consequences?
- 37:15 - Which family of sector ETFs does ARMR use for exposure to the 11 GICS sectors?
- 41:00 - Is ARMR meant to be a core portfolio holding, or a satellite way of increasing alpha?
