Ned Davis Research (NDR), a global provider of independent investment research insights, tools and solutions, in partnership with Day Hagan Asset Management (Day Hagan), today announced the launch of their first co-developed ETF, Smart Sector™ With Catastrophic Stop (NYSE:SSUS), which takes advantage of NDR’s proprietary sector and U.S. Stock Market models.
The Smart Sector™ With Catastrophic Stop strategy is designed to enhance returns over a buy-and-hold, equity benchmark by overweighting and underweighting 11 U.S. large-cap sectors based on NDR’s sector models. Each of the models utilizes sector specific, weight of the evidence composites of technical, fundamental, economic, and behavior-based indicators to determine each sector’s probability of outperforming.
The strategy also seeks to mitigate the effects of major market declines by reducing equity market exposure through the use of NDR’s Catastrophic Stop model. As soon as the Catastrophic Sell Stop model moves back to levels indicating risks have subsided, the strategy immediately moves back to a fully invested equity allocation.
“We’re excited to partner with Ned Davis Research to launch the first of many ETFs,” said Arthur Day, partner, co-founder and senior portfolio manager at Day Hagan. “While our clients have benefited from NDR’s Smart Sector™ models in our separately managed accounts, we’ve seen strong demand for a similar strategy in an ETF wrapper. We expect to bring to market additional co-developed funds later this year.”
“Many tactical allocation models rely on just one type of analysis for their allocation and timing decisions, which could increase the risk of losses during different market regimes,” said Brian Sanborn, vice president of investment solutions at NDR. “There are over 100 diverse indicators in our sector models, which we think provides a more holistic approach. As we face an increasingly aging bull market, we think a strategy like SSUS could make a lot of sense for investors.”
To determine each sector’s probability of outperforming, the Smart Sector™ model combines sector-specific fundamental, technical, economic and behavioral indicators. This provides another layer to risk management by overweighting sectors with the highest probability of success based on sector-specific composite models, while underweighting sectors with little or no support from the model.
At the same time, the Catastrophic Stop identifies periods of high risk in the U.S. equity market when a diverse group of established indicators conclusively turn negative. When the Catastrophic Stop is triggered, the equity-invested position in the strategy is reduced to 50% until the model moves back to being bullish again.
About Ned Davis Research
Ned Davis Research (NDR) uses the weight of the evidence and a 360-degree approach to build up to market insights. When we say “evidence,” we mean processing millions of data series to fuel a historical perspective, build proprietary indicators and models, and calm investors in a world full of bull/bear news hype and hysteria. We believe that no client is too big or too small to benefit from NDR’s insights.
In 1980, Ned Davis founded a new investment research group based on his fundamental belief that making money is more important than being right. Today, we are widely recognized for concise commentary and unbiased views. NDR is headquartered in Venice, Florida, with offices in New York, Atlanta, Boston, San Francisco, London and Hong Kong.
Day Hagan Asset Management (DHAM) was founded in 2004 to provide investment management and research to clients and institutions. DHAM’s philosophy is that a quantitative, scientific, unemotional and model-based approach to the markets may provide better risk-adjusted returns. The models search for confirmation among many diverse indicators, providing the flexibility to seize opportunities in the marketplace in a rational manner.
Hod Klein, Ned Davis Research, [email protected]
References to “NDR” throughout refer to Ned Davis Research, Inc. NDR is a registered as an investment adviser with the Securities and Exchange Commission (SEC). NDR serves as the Signal Provider in connection with this strategy. The information provided here has not been approved or verified by the SEC or by any state or other authority. Additional information about NDR also is available on the SEC’s website at www.Adviserlnfo.sec.gov. This material is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or to participate in any trading strategy. NDR’s strategies, including the model discussed in this publication, are intended to be used only by sophisticated investment professionals.
Ned Davis Research, Inc. makes no representation or warranty, expressed or implied, regarding whether Smart Sector™ With Catastrophic Stop ETF is suitable for investors generally or the advisability of trading in such product. Ned Davis Research, Inc. does not guarantee that the strategy referenced by the Smart Sector™ With Catastrophic Stop ETF have been accurately calculated or that the strategy appropriately represents a particular investment strategy. The strategy is heavily dependent on quantitative models and data from one or more third parties, and there is no guarantee that these models will perform as expected. While the strategy is designed to reduce risk from adverse market conditions, there is a risk that actual performance could be worse than a buy-and-hold strategy. Ned Davis Research, Inc. and its affiliates shall not have any liability for any error in the strategy calculation or for any infirmity in the Smart Sector™ With Catastrophic Stop ETF.
NDR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE SMART SECTOR WITH CATASTROPHIC STOP ETF OR ANY DATA INCLUDED THEREIN AND NDR SHALL NOT HAVE ANY LIABILITY WHATSOEVER FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NDR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE SMART SECTOR WITH CATASTROPHIC STOP ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SMART SECTOR WITH CATASTROPHIC STOP STRATEGY OR ANY DATA INCLUDED THEREIN. NDR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE SMART SECTOR WITH CATASTROPHIC STOP STRATEGY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL NDR HAVE ANY LIABILITY, JOINTLY OR SEVERALLY, FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
There may be a potential tax implication with a rebalancing strategy. Re-balancing involves selling some positions and buying others, and this activity results in realized gains and losses for the positions that are sold. This reduction could be material to the overall performance of an actual trading account. NDR does not provide legal, tax or accounting advice. Please consult your tax advisor in connection with this material, before implementing such a strategy, and prior to any withdrawals that you make from your portfolio.