On Jan 11th, 2011, AdvisorShares announced a brand new partnership with TrimTabs Investment Research that will lead to the development of a new actively-managed ETF. The new Active ETF will apply TrimTabs’ liquidity-based investment strategy, according to the press release.
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. In April 2010, TrimTabs had grabbed headlines in the ETF space by releasing a research note which pointed to using equity ETF flows as a contrary leading indicator for the general markets. That note claimed that monthly ETF equity flows and the returns on the S&P500 a month later are negatively correlated to the tune of 21.4%. A simple model following these contrarian signals resulted in average gains of 281% over the past decade.
TrimTabs is now collaborating with AdvisorShares in an attempt to bring this liquidity focused investment approach to investors through an Active ETF structure. Charles Biderman, Founder and Chief Executive Officer of TrimTabs, said, “At TrimTabs, we believe that partnering with AdvisorShares in creating this investment vehicle which will meld our extensive liquidity-based investment research with AdvisorShares’ ETF expertise into a liquid, transparent actively managed ETF could be a winning proposition in the investment advisor community”.
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. Biderman adds, “Most quantitative ETFs focus on easily available price, volume, and earnings data. Since data on the supply and demand for stocks is scattered across so many sources, most strategies ignore stock market liquidity. However we believe that stock prices are a function of liquidity rather than value. Like the prices of any tradable good, the prices of stocks are driven by supply and demand”.
Each of AdvisorShares’ five actively-managed ETFs have been launched in partnership with a separate investment manager who acts as the sub-advisor to their ETFs. This collaboration with TrimTabs adds to AdvisorShares pipeline which was just recently augmented by a filing for another new tactical ETF. The next fund to come to market from AdvisorShares should be the Active Bear ETF (NYSE:HDGE), a short-only equity fund, that will be yet another first from the company.
Written By Shishir Nigam from ActiveETFs | InFocus Disclosure: No positions in above-mentioned names.
Shishir Nigam is the founder of ActiveETFs | InFocus (http://www.etfshub.com/), which provides extensive coverage and analysis of actively-managed ETFs in US and Canada, including debates on major industry trends, insights on the latest product launches from issuers in the Active ETF space as well as in-depth interviews with industry executives and thought leaders.
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