FFCM will begin trading its new “QuantShares U.S. Market Neutral Size Fund” (NYSE:SIZ) Wednesday, September 07, 2011. The Fund seeks performance results that correspond to the price and yield performance, before fees and expenses, of the U.S. Market Neutral Size Index.
Total Annual Fund Operating Expenses: 2.97 %
Principal Investment Strategies
The Fund seeks to track the performance of the U.S. Market Neutral Size Index (the “Target Size Index”) by investing at least 80% of its net assets (plus any borrowings for investment purposes) in common stock, including the short positions, in the Target Size Index. The Target Size Index is a market neutral index that is dollar-neutral. As such, it identifies long and short securities positions of approximately equal dollar amounts. In choosing to track a market neutral index, the Fund seeks to limit the effects of general market movements on the Fund and to limit the correlation of the performance of the Fund with the market’s overall movements.
The universe for the Target Size Index is the top 1,000 eligible securities by market capitalization in the Dow Jones U.S. Index (“universe”). The securities included in the universe are categorized as belonging to one of 10 sectors. The Target Size Index identifies approximately the 20% of the securities with the smallest market capitalizations within each sector as equal-weighted long positions and approximately the 20% of securities with the largest market capitalizations within each sector as equal-weighted short positions.
Although it is expected that the Fund’s assets will be invested in all of the long and short positions that comprise the Target Size Index, the Fund may use a sampling strategy to track the performance of the Target Size Index. A sampling strategy involves investing in a representative sample of the long and short positions in the Target Size Index that, collectively, have an investment profile correlated with the Target Size Index. In either case, the weightings of the long and short positions in the Fund’s portfolio may differ from their weightings in the Target Size Index.
For the Fund, size investing entails investing in securities within the universe that have below-average market capitalizations and shorting securities within the universe with above-average market capitalizations. The performance of the Fund will depend on the differences in the rates of return between these long positions and short positions. For example, in a rising market, if the Fund’s long positions appreciate more rapidly than its short positions, the Fund would generate a positive return, which would be the difference between the rates of return between the long positions and short positions. However, if the opposite occurred, the Fund would generate a negative return.
The Fund expects to invest up to 20% of its total assets in instruments other than the long and short positions in the Target Size Index, which FFCM LLC, the Fund’s investment adviser (“Adviser”), believes will help the Fund track its Target Size Index. Such instruments are expected to long and short common stocks not in the Target Size Index, derivatives, including swap agreements based on the Target Size Index and futures contracts on equity indexes, and money market instruments.
The Target Size Index, which is compiled by Dow Jones Indexes, is equal-weighted and sector neutral – meaning that at each reconstitution of the index, all of the components of the index are equal-weighted and the number of long and short positions in each sector in the index approximate the weighting of that sector in the universe. For example, if a sector in the universe comprises 100 securities, the index would identify the 20 securities with the smallest market capitalization within that sector as long positions and the 20 securities with the largest market capitalization within that sector as short positions. If between reconstitutions the value of short positions in the Target Size Index exceeds the value of the long positions by an amount that is established by the index provider, the Target Size Index will be rebalanced back to equal weights and sector neutrality. The Target Size Index is reconstituted monthly.
The Fund will concentrate its investments (i.e., hold 25% or more of its total assets) in a particular industry or group of industries to approximately the same extent that its Target Size Index is concentrated. For purposes of this policy, securities of the U.S. government (including its agencies and instrumentalities) and repurchase agreements collateralized by U.S. government securities are not considered to be issued by members of any industry.
You can find more information on this fund: HERE