Bethesda, Maryland-based AdvisorShares announced today the launch of the Mars Hill Global Relative Value ETF (GRV), the second ETF product from the company. The new ETF will be actively-managed; instead of seeking to replicate the performance of a particular benchmark, GRV will attempt to generate consistent positive returns in excess of the average annual return of the MSCI World Index.
GRV employs a “relative value” approach created by Mars Hill. The idea behind the strategy is to combine long positions in the most attractive country, sector and industry ETFs with equal dollar amounts short in the least attractive country, sector and industry ETFs. In other words, GRV employs a long/short portfolio construction strategy, seeking to profit from the performance spread between long and short positions. Because they have the potential to generate positive returns in either bull or bear markets, long/short strategies have become a favorite tool of investors in uncertain economic environments [see Three Long/Short ETF Ideas For The Third Quarter].
“GRV has an institutional-caliber investment strategy that is designed to pursue consistent positive absolute returns regardless of the direction of the stock market or interest rates. We are excited to bring investors access to this compelling investment strategy through an actively managed ETF,” said Noah Hamman, CEO and Founder of AdvisorShares, in a press release.
GRV’s has the latitude to invest in a variety of underlying holdings, but is primarily structured as an “ETF of ETFs,” investing in other exchange-traded funds. According to the fund’s web site, the largest long positions currently are in the Vanguard REIT ETF (VNQ), JP Morgan Alerian MLP Index ETN (AMJ), and iShares MSCI Japan Index Fund (EWJ). The most significant short positions are in the iShares MSCI EMU Index Fund (EZU), iShares MSCI France Index Fund (EWQ), and iShares MSCI Australia Index Fund (EWA). So it appears that GVT is making a bet that dividend paying-securities–both VNQ and AMJ offer healthy yields–will outperform the embattled equity markets of Europe.
Another Step Forward
To date, the active ETF space has been slow to develop. Aside from a few big successes–PIMCO’s MINT and WisdomTree’s currency suite have taken in significant cash–most active funds have been slow to gain traction. Despite the slow start, there are signs that an active ETF boom isn’t far off. A number of big players in the mutual fund space are poised to venture into the ETF space, a move that would bring a wealth of assets and attention. Last month, Grail Advisors announced a partnership with DoubleLine, the firm founded by legendary bond investor Jeffrey Gundlach [see Grail & Gundlach: Match Made In ETF Heaven?].
GVT is the second fund in the AdvisorShares product line, joining the Dent Tactical ETF (DENT). DENT seeks to utilize proprietary economic and demographic analysis to identify the overall trend of the U.S. and global economies and how consumer spending patterns may change. Since its inception in September 2009 DENT has taken in about $22 million in assets, making it one of the largest actively-managed ETFs.
GVT will charge a management fee of 1.35 and a gross expense ratio of 1.49%. The fund’s advisor has agreed to keep expenses from exceeding 1.5% until March 2011.
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Disclosure: No positions at time of writing.