ValueShares today announced that it has launched its first active exchange-traded fund, the ValueShares U.S. Quantitative Value ETF (BATS:QVAL). QVAL pursues its investment objective by investing primarily in U.S. equity securities the Advisor believes to be the cheapest, highest-quality value stocks in the market. The Advisor to QVAL anticipates transferring $50 million from its separately managed accounts into the Fund. The managed account capital’s sources are a multi-billion dollar family office and other high-net-worth clients of the Fund’s Advisor, Alpha Architect.
“We believe our edge is robust: we design systematic investment programs that seek to exploit mispricing caused by irrational investors,” said Founder and CIO, Wesley R. Gray, Ph.D. “We invest the majority of our resources in research and development, with a focus on understanding how investor psychology affects stock prices. QVAL seeks to exploit the so-called value anomaly in a systematic, high-conviction, tax-efficient, and affordable way.”
Dr. Gray started developing his algorithm 12 years ago when he was a finance Ph.D. student at the University of Chicago, where he studied under Nobel Prize Winner, Eugene Fama. The philosophy underlying the algorithm was later published by John Wiley & Sons in a co-authored book, QUANTITATIVE VALUE: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors.
QVAL joins a small number of concentrated, active, and value-based ETFs currently in the marketplace. QVAL may invest in securities of companies in any industry and with any market capitalization. The Fund will invest in approximately 50 of the top U.S. equity securities as determined by its quantitative value system.
When asked why QVAL was explicitly designed to be concentrated and highly active, Dr. Gray responded: “We could have gone the ‘Smart Beta’ route and built a closet-index strategy that holds 100, 200, or more stocks.1 However, investors are paying us to take active bets; they are not paying us to deliver what is effectively a Vanguard S&P 500 ETF with a small tilt towards some factor.”
QVAL may be best suited for investors and advisors that want a concentrated exposure to what the Advisor believes are the cheapest, highest-quality value firms in the market. The Fund’s Advisor adheres to a value investment philosophy and utilizes computer technology to minimize human biases, read financial statements, interpret past trends, and assess future prospects.