+ 2.03
+ 0.61%
+ 2.82
+ 0.84%
+ 3.01
+ 0.74%

Short-Term Reversal ETF Builds Impressive Roster Of Long-Term Investors

September 1, 2020 1:50 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
Short-Term Reversal ETF Builds Impressive Roster Of Long-Term Investors

Institutional investors have long been fans of exchange-traded funds. In fact, insurance companies, endowments and pension plans, among others, are among the biggest drivers of ETFs' ascent from obscurity to one of the world's dominant asset classes.

What Happened: Typically, when these types of investors turn to ETFs, they use pure beta strategies, also known as plain vanilla ETFs. Or, in some cases, they'll take on multi-factor or other smart beta products. Rarely, do institutional investors cozy up to intricate ETFs with somewhat complex strategies hailing from independent issuers.

The Vesper U.S. Large Cap Short-Term Reversal Strategy ETF (NYSE:UTRN) is flipping that script.

Why It's Important: In reality, UTRN isn't a complex strategy. It follows the UTRNX Index and uses the Chow Ratio (CR) to capitalize on stocks that have declined and are now offering potentially large rebound potential.

“The conventional measure of price movement volatility, standard deviation, assumes investors treat their winning stocks the same way they treat their losing stocks (i.e. volatility is symmetric),” according to Vesper Capital Management. “However, in many instances, the fear of loss causes investors to sell their downward-trending stocks much sooner than their upward-trending stocks. This overreaction results in significantly more downside price movement than upside price movement causing actual volatility to be asymmetric. Therefore, the CR incorporates an asymmetric measure to more effectively select securities.”

Professional investors seem to like the UTRN idea. Last week, the Dauphin County, Pennsylvania retirement board voted to allocate $5 million to UTRN, bringing the number of institutional investors involved with the ETF to 11, according to the issuer.

That's impressive institutional penetration for an ETF with about $47 million in assets under management that's about to turn 2 years old.

What's Next: Past performance is never a guarantee of future returns and professional investors know this just as well as anyone. Still, UTRN's track record is impressive and hard to ignore.

Three weeks shy of its second birthday, UTRN is in a small but illustrious group of large-cap blend ETFs that have beaten the S&P 500 since the fourth quarter of 2018, all of last year and so far in 2020.

Keep up that legacy of beating the broader market and it wouldn't be surprising to see UTRN lure more high-level investors. Plus, at 0.75% per year, or $75 on a $10,000 investment, UTRN is actually cheap for this type of strategy.

Related Articles

An ETF Play On Laggard Stocks

Investors are hearing plenty about zealous day traders and users of a particular financial app buying left-for-dead stocks only to recognize spectacular gains. read more

Play Rebounding Dogs With This ETF

A New ETF Aims To Buy The Dip