Market Overview

A Gem Among High Beta ETFs

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A Gem Among High Beta ETFs

Low volatility exchange traded funds get plenty of attention. Their high beta counterparts, not so much, but there are some credible options in the high beta ETF space.

One of those funds is the Salt High truBeta US Market ETF (CBOE: SLT).

What Happened

SLT, which is almost a year old, tracks the Salt High truBeta™ US Market Index. That index targets large- and mid-cap stocks with above-average sensitivity to the SPDR S&P 500 ETF (NYSEARCA: SPY). The index has a true beta estimate of 1.5, meaning it aims to capture to 50 percent more variation than the broader market in the same direction, according to the issuer.

“Beta is widely familiar to investors in describing the relationship between the risk and return for an asset relative to the overall market,” according to Salt Financial. “A security with an estimated beta of 1.0 is expected to vary in the same direction and magnitude as the market. A beta of 1.5 would be interpreted to vary 50% more than the overall market; a beta of 0.50 would be expected to vary 50% less, and so on.”

Why It's Important

Although the S&P 500 and Nasdaq-100 indexes recently hit record highs, low volatility ETFs have been commanding plenty of headlines this year. That while the high beta SLT is setting a torrid pace. SLT is up 8.44 percent just this month, extending its year-to-date gain to 30.34 percent. SLT is beating the rival Invesco S&P 500 High Beta ETF (NYSE: SPHB) by nearly 500 basis points year-to-date.

As of April 23, SLT's underlying index had 101 components, featuring what has been a rewarding mix of technology and energy stocks. Those two sectors combine for 52 percent of the index's weight. Financial services and industrial stocks combine for 29.30 percent.

As a high beta benchmark SLT doesn't feature exposure to all 11 of the GICS sectors. Not surprisingly, consumer staples, real estate and utilities -- hallmarks of low volatility funds -- do not reside in SLT's roster.

What's Next

With stocks continuing to march higher, those bullish on the broad market's near-term prospects may want to consider SLT as an alternative to momentum strategies. Year-to-date, SLT is beating the MSCI USA Momentum Index by a margin of better than 2-to-1.

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Posted-In: Long Ideas Broad U.S. Equity ETFs Specialty ETFs Top Stories Trading Ideas ETFs Best of Benzinga

 

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