Checking In On The DENT ETF

by on November 11, 2009 | ETFs Mentioned:

Earlier this year, best-selling author Harry Dent , Jr. ventured into the ETF industry, launching the Dent Tactical ETF (DENT) in a move that further blurred the lines between active and passive management. DENT is actively managed by a team of analysts using primarily economic and demographic analysis to determine the overall trend of U.S. and global economies and how consumer spending patterns may change based on this analysis. DENT has been trading for only about two months, but a look at the fund’s performance over that period and its current holdings reveals some interesting trends.

Blurring The Lines

DENT isn’t the first actively-managed ETF – PowerShares introduced four active funds in April 2008 and Grail followed suit in May of this year – but it is unique in several ways. The PowerShares and Grail active funds focus primarily of selecting individual stocks (and bonds and REITs, in the case of PLK and PSR, respectively), while DENT is an “ETF of ETFs,” investing in other exchange-traded funds across various asset classes to execute a tactical strategy.

DENT’s current allocation shows that its managers are not too bullish on the prospects for U.S. equity markets, at least not relative to the rest of the world. DENT’s only U.S. equity exposure is to the technology sector and the Dow Jones Industrial Average. The fund’s holdings as of November 10 included:

Ticker ETF %
BIL SPDR Barclays 1-3 Month T-Bill ETF 19.8%
EPP MSCI Pacific ex-Japan Index Fund 10.0%
IYW Dow Jones U.S. Technology Sector Index Fund 10.0%
EWZ MSCI Brazil Index Fund 10.0%
GWX S&P International Small Cap ETF 9.9%
IEV S&P Europe 350 Index Fund 9.8%
ECH MSCI Chile Index Fund 9.7%
DIA Diamonds Trust Series I 9.6%
EWU MSCI United Kingdom Index Fund 9.5%

Slow Start

Unlike most (but not all) U.S.-listed ETFs, DENT has the flexibility to invest in a number of asset classes, including fixed income and domestic and international equities. Harry Dent, one of the fund’s two managers, is the developer of the Dent Method, an economic forecasting approach based on changes in demographic trends. In 1992, Dent published The Great Boom Ahead, accurately predicting the unexpected bull market of the 1990s. But Dent has had his share of misses as well: in 2006 he predicted the Dow hitting 40,000 by the end of the decade.

The goal of DENT is long term growth of capital, so it is perhaps unfair to evaluate the fund’s performance after only two months. But the ETF has gotten off to a slow start, trailing behind the broad-based iShares Russell 3000 Index Fund (IWV) as well as the iShares Aggregate Bond Fund (AGG) since its inception:

DENT Trails AGG and IWV

Disclosure: No positions at time of writing.