AdvisorShares Global Alpha & Beta ETF (RRGR) began trading today (7/11/12). RRGR is an actively managed, broadly diversified global tactical asset allocation ETF whose goal is to outperform traditional investment benchmarks. Using a top-down perspective, the manager applies tactical asset allocation and security selection to mitigate risk and pursue performance.
Roger Nusbaum (aka “Random Roger”) of Your Source Financial will manage the RRGR portfolio. The five-step investment process (pdf) starts by assessing “big picture” items like the S&P 500 200-day moving average or an inverted yield curve. From there, the process determines the desired sector, style, and country weightings. It then builds core holdings using fundamental analysis before implementing narrower themes. Finally, counter strategies are added to the mix to improve diversification and reduce volatility.
Initial asset allocation for the ETF is 83% equities (50% domestic, 24% developed international, 9% emerging markets), 12% cash, and 4% commodities. Details on sector allocations, country breakdown, and yield expectations are not provided on the overview page but are anticipated to vary dramatically over time.
The fund will typically invest in other ETFs, individual stocks, and ADRs. Presently, it has 32 holdings. The five largest, in addition to cash, are iShares DJ US Technology (IYW) 14.9%, Vanguard Telecommunications (VOX) 4.0%, HJ Heinz (HNZ) 3.0%, Kinder Morgan Energy Partners (KMP) 3.0%, and Diageo ADR (DEO) 3.0%.
Fund expenses will be capped at 1.25% plus an estimated 0.15% in acquired fund fees, placing the total expense ratio at 1.40%.
While RRGR itself has no performance history, the prospectus (pdf) describes the manager’s Global Alpha & Beta Composite as representing the performance of separately managed accounts having substantially similar objectives, policies, and strategies. From its inception (7/31/2004) through year-end 2011, the composite returned +6.3% annualized, adjusted for a 0.98% management fee. In comparison, SPDR S&P 500 (SPY) returned +3.8% and iShares Barclays Aggregate Bond (AGG) returned +5.4% for the same period. The prospectus does not include volatility or drawdown history for the composite.
As a global tactical asset allocation ETF, RRGR will compete primarily with other AdvisorShares offerings like the Cambria Global Tactical ETF (GTAA) and Meidell Tactical Advantage ETF (MATH).