New Revenue-Weighted Quant ETF Launched Today: RWV

The press release touts it as a quant-driven ETF; applying revenue-weighting to Navellier’s alpha generating all-cap quantitative strategy.  Louis Navellier’s approach to the market, and the methodology employed by RevenueShares both have merit, but a peak under the covers of this new ETF offering reveals a lot of hypotheticals.

Description/Objective:  RevenueShares Navellier Overall A-100 Fund (RWV) seeks to outperform the total return performance of the Navellier Overall A-100 Index by using revenue weighting instead of the equal-weighting methodology employed by Navellier.

That all sounds well and good, but a google search of “Navellier Overall A-100 Index” turned up a total of only seven hits today, and all seven were related to either today’s announcement or the SEC filing of last July.  In other words, the Navellier Overall A-100 Index did not exist before today, it is a new hypothetically backtested index.

Furthermore, it is not even the index the ETF is based on.  Go back and read the description again.

The ETF is based on a RevenueShares version of the index, which is a hypothetically backtested modification to the hypothetically backtested index.  In other words, it is hypothetical-squared.  The RevenueShares ETF fact sheet adds, “…returns are historical and reflect the reinvestment of dividends and capital gains.  Index returns became publicly available 1/23/09 and performance shown prior to this date is based on hypothetical backtested…”   Translation: The returns are historical, but history starts today.

They also disclosed that the hypothetical-squared testing resulted in a -55.39% return in 2008 and graciously added a 10-year linear (non-logarithmic) chart illustrating this plunge even more dramatically.  The data also indicates you should expect volatility to be 63% greater than the Russell 3000 index. 

On its first day of trading, 1490 shares of RWV changed hands.

Disclosure:  no positions in RWV