Mystery ETF Revealed

Some interesting, quick ETF stuff today. 

Below is a chart of the Tradr 2x Long SPY Weekly ETF (SPYB) compared to the S&P 500 and the ProShares Ultra S&P 500 ETF (SSO). Where market cap weighted 2x S&P 500 funds are concerned, they tend to be close more often than not. One month is not enough time to draw a conclusion about SPYB but it better then coming out of the blocks and failing right away. I check all three of the Tradr 2x Long SPY ETFs every day and not surprisingly, the quarterly version which has symbol SPYQ, usually has the most volume.

Here's a filing where I love the concept but think it would be very difficult to have success actually using. 

The idea is that the fund would go long the first symbol, like NVDA and short the second one like INTC. These aren't market neutral pairs trades like maybe going long Pepsi and short Coke a Cola or an example from many years ago, long Intel, short AMD. They appear to be paired to go all out for alpha. I modeled a few of the ones listed. 

The result is fantastic from a learning perspective. Long Amazon, short Macy's failed. Long Google, short New York times had negative compounding. I'm sure Battleshares, love the name though, are intended as shorter term trading vehicles but you really have to get several different and potentially unrelated things correct in order to make money with these.

Let's take a look at whether complexity is compensated or uncompensated. We've mentioned the PIMCO StocksPLUS Long Duration (PSLDX) which is 100/100 stocks and long bonds. There are other funds in that suite including the PIMCO StocksPLUS Absolute Return (PSPNX). PSPNX leverages up 100% equities and 100% absolute return. For a little context, putting an entire portfolio into PSPNX would have compounded since inception at 13.89% with a standard deviation of 19.29% versus 14.67% and 17.51% for the S&P 500. The idea is not that anyone put it all into PSPNX but those numbers give an idea of how it behaves. The potential use would be how a smaller weight incorporates in to a diversified portfolio. Is the complexity of combining equities and absolute return compensated or uncompensated?

Both Portfolios 1 and 2 do better than Vanguard Balanced Index (VBAIX) which is a proxy for a 60/40 portfolio. Between 1 and 2 it's sort of a push. With Portfolio 1, the gain in return over 2 is greater than the increased volatility. The advantage of Portfolio 2 is that the 10% in T-bills provides insulation against sequence of return risk. Whether the complexity of either portfolio provides enough compensation is up to the end user but the portfolios are fairly described as simplicity hedged with a little complexity, whether you're talking about ADAIX or PSPNX.

The STKD Bitcoin and Gold ETF (BTGD) that we wrote about yesterday actually started trading today. It didn't have a great day. 

Earlier this week, I wrote about a mystery ETF and tested it out as part of a diversified portfolio. The mystery fund is the McElhaney Sheffield Risk Managed ETF (MSMR). It owns equites via two different strategies, trend and sector rotation. As a stand alone, it hasn't kept up with the S&P 500 but as a sort of hybrid with some low volatility attributes and some fixed income attributes it appears to have added value when used in a correct proportion. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.