Day Hagan/Ned Davis Research Smart Sector ETF (SSUS)

ETF Day Hagan/Ned Davis Research Smart Sector ETF

Profile:

ETF Day Hagan/Ned Davis Research Smart Sector ETF (ticker: SMRT) is an actively managed exchange-traded fund that seeks to outperform the S&P 500 Index by investing in a diversified portfolio of U.S. large-cap stocks across 10 different sectors. The ETF utilizes a proprietary, rules-based ranking system developed by Ned Davis Research (NDR) to select and weight its holdings, aiming to capture potential alpha from sector rotation and security selection.

Objective:

The primary goal of SMRT is to generate long-term capital appreciation by exceeding the return of the S&P 500 Index through a combination of active sector allocation and security selection.

Issuer:

ETF Series Solutions: ETF Series Solutions acts as the sponsor of the SMRT ETF. They specialize in launching and managing actively-managed ETFs and work with various sub-advisors to offer diverse investment strategies.

Reputation and Reliability: ETF Series Solutions is a relatively young firm established in 2018. They currently sponsor a small number of actively-managed ETFs. As they are a new entrant, their reputation and track record are still under development.

Management: The sub-advisor for SMRT is Hagan Stocking & Associates, LLC, an investment management firm founded in 1985. Hagan Stocking is responsible for the implementation of the NDR ranking system and portfolio construction for the ETF. The firm possesses extensive experience in applying quantitative investment strategies.

Market Share:

SMRT is a relatively small ETF with a market share of less than 1% within its actively-managed large-cap ETF category.

Total Net Assets:

As of October 26, 2023, SMRT has approximately $430 million in total net assets.

Moat:

SMRT's competitive advantages include:

• Unique Strategy: The ETF employs the NDR ranking system, which combines quantitative analysis with fundamental data to identify sectors and stocks poised for outperformance. This strategy aims to differentiate itself from traditional index-tracking ETFs and potentially generate superior returns.
• Experienced Management: Hagan Stocking brings a long history of quantitative investment experience, offering expertise in managing actively-managed portfolios.
• Niche Focus: SMRT targets the large-cap segment of the U.S. equity market, attracting investors seeking exposure to this specific category while aiming to outperform.

Financial Performance:

Since its inception in November 2022, SMRT has delivered a total return of 5.4%, compared to the S&P 500 Index's return of 4.2% during the same period. However, it is important to remember that past performance is not indicative of future results.

Benchmark Comparison:

While SMRT has outperformed the S&P 500 Index in its short history, it is crucial to monitor performance over longer timeframes and market cycles to more accurately assess its effectiveness against the benchmark.

Growth Trajectory:

Despite the initial outperformance, it is difficult to establish a clear growth trajectory for SMRT due to its recent launch. The future performance will depend on the effectiveness of the NDR ranking system in identifying winning sectors and securities.

Liquidity:

The average daily trading volume for SMRT is approximately 25,000 shares, indicating moderate liquidity.

Bid-Ask Spread:

The average bid-ask spread for SMRT is around 0.10%, which suggests a relatively low trading cost.

Market Dynamics:

Market factors impacting SMRT include:

• Economic Indicators: Economic growth, interest rate changes, and inflation can impact sector performance and influence the ETF's returns.
• Sector Growth Prospects: The outlook for specific sectors can drive or hinder the overall performance of the
• Market Volatility: Elevated market volatility can increase the ETF's price fluctuations and impact investor risk tolerance.

Competitors:

Key competitors in the actively managed large-cap ETF space include:

• Invesco S&P 500 Equal Weight ETF (RSP)
• Vanguard S&P 500 Growth ETF (VOOG)
• iShares Russell 1000 Value ETF (IWD)

Expense Ratio:

The expense ratio for SMRT is 0.75%, which is higher than the expense ratios of many passively managed ETFs but lower than some actively managed funds in the same category.

Investment Approach and Strategy:

Strategy: SMRT actively manages its portfolio, deviating from a specific index to potentially capture alpha through sector rotation and security selection.

Composition: The ETF primarily holds large-cap U.S. stocks, with sector allocations based on the NDR ranking system. Currently, the portfolio is heavily weighted towards the technology and healthcare sectors.

Key Points:

• Actively managed strategy aiming to outperform the S&P 500
• Employs NDR ranking system for sector and security selection
• Moderate expense ratio
• Relatively small and newly launched

Risks:

Key risks associated with