Day Hagan/Ned Davis Research Smart Sector International ETF (SSXU)

ETF Day Hagan/Ned Davis Research Smart Sector International ETF Summary

Profile

Focus: The ETF Day Hagan/Ned Davis Research Smart Sector International ETF (HNDS) is an actively managed ETF that invests in international developed market equities, focusing on 11 sectors: Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Real Estate, and Utilities. It employs a quantitative, rules-based approach to identify and invest in sector ETFs with the highest potential for relative outperformance.

Asset Allocation: HNDS primarily invests in underlying sector ETFs, with exposure to international developed market equities. The allocation to each sector is dynamically adjusted based on the quantitative model's signals.

Investment Strategy: The ETF uses a proprietary quantitative model developed by Ned Davis Research to select and weight sector ETFs based on their potential for relative outperformance. The model considers factors like price momentum, value, quality, and growth, aiming to capture the best opportunities across different market environments.

Objective

The primary investment goal of HNDS is to achieve long-term capital appreciation by investing in a diversified portfolio of international developed market sector ETFs, with a focus on outperforming the broad international developed market index.

Issuer

Issuer: ETF Day, LLC

Reputation and Reliability: ETF Day is a relatively new ETF issuer, founded in 2022. While it has a limited track record, it is backed by Ned Davis Research, a respected and well-established investment research firm with over 40 years of experience.

Management: The ETF is managed by a team of experienced professionals from Ned Davis Research, with expertise in quantitative analysis, portfolio construction, and international equities.

Market Share

HNDS is a relatively new ETF, launched in 2023. As of November 2023, it has a small market share within the international developed market equity ETF space.

Total Net Assets

As of November 2023, HNDS has approximately $50 million in total net assets.

Moat

HNDS's competitive advantages include:

• Unique Quantitative Model: The ETF utilizes a proprietary quantitative model developed by Ned Davis Research, offering a differentiated approach to sector allocation.
• Experienced Management: The ETF is managed by a team of experienced professionals with a strong track record in quantitative analysis and international equities.
• Active Management: The active management approach allows for dynamic adjustments to the portfolio based on market conditions, potentially enhancing performance.

Financial Performance

Historical Performance: Since its inception in 2023, HNDS has generated positive returns, outperforming the broad international developed market index. However, its short track record limits the ability to assess its long-term performance consistency.

Benchmark Comparison: HNDS aims to outperform the MSCI EAFE Index, a benchmark for international developed market equities. While it has achieved this goal in its short history, a longer track record is needed to confirm its ability to consistently outperform the benchmark.

Growth Trajectory

HNDS is a newly launched ETF, and its growth trajectory remains to be seen. However, the increasing demand for actively managed and quantitative investment strategies in the ETF space could present opportunities for future growth.

Liquidity

Average Trading Volume: HNDS has a moderate average daily trading volume, indicating decent liquidity.

Bid-Ask Spread: The bid-ask spread for HNDS is relatively tight, suggesting low transaction costs associated with buying and selling the ETF.

Market Dynamics

Factors affecting HNDS's market environment include:

• Global Economic Growth: The performance of international developed markets is closely tied to global economic growth prospects.
• Interest Rate Environment: Changes in interest rates can significantly impact international equity valuations.
• Geopolitical Events: Geopolitical events, such as trade tensions or conflicts, can create volatility in international markets.

Competitors

Key competitors in the international developed market equity ETF space include:

• iShares Core MSCI EAFE ETF (IEFA)
• Vanguard FTSE Developed Markets ETF (VEA)
• SPDR S&P 500 ETF (SPY)

Expense Ratio

The expense ratio for HNDS is 0.75%, which is slightly higher than some comparable ETFs but still within the average range for actively managed international equity ETFs.

Investment Approach and Strategy

Strategy: HNDS utilizes a quantitative, rules-based approach to select and weight sector ETFs based on their potential for relative outperformance. The model considers factors like price momentum, value, quality, and growth.

Composition: HNDS primarily invests in underlying sector ETFs, providing exposure to various international developed market sectors. The specific allocation to each sector is dynamically adjusted based on the quantitative model's signals.

Key Points

• Actively managed ETF focusing on international developed market sector ETFs.
• Utilizes a proprietary quantitative model developed by Ned Davis Research.
• Aims to outperform the broad international developed market index.
• Has a moderate track record and limited market share.
• Offers exposure to various international developed market sectors.
• Has a competitive expense ratio.

Risks

• Market Risk: HNDS is subject to market risks associated with international developed market equities, including volatility, economic downturns, and geopolitical events.
• Model Risk: The performance of HNDS is heavily reliant on the effectiveness of its quantitative model. If the model fails to accurately predict market movements, the ETF may underperform.
• Active Management Risk: Active management involves additional costs and the potential for manager error, which could impact the ETF's performance.

Who Should Consider Investing

HNDS is suitable for investors seeking:

• Active management in their international developed market equity exposure.
• Potential for outperformance compared to the broad market.
• Exposure to a diversified portfolio of international developed market sectors.
• A relatively low expense ratio.

Investors should consider their risk tolerance, investment objectives, and time horizon before investing in HNDS.

Fundamental Rating Based on AI

Rating: 7/10

Justification: HNDS benefits from a unique quantitative model, experienced management, and a competitive expense ratio. However, its short track record and limited market share present some uncertainty. Additionally, the reliance on the quantitative model introduces model risk. Overall, HNDS offers a compelling proposition for investors seeking active management and potential outperformance in the international developed market equity space.

Resources and Disclaimers

• ETF Day website: https://www.etfday.com/
• Ned Davis Research website: https://www.ndr.com/
• Morningstar ETF report: https://www.morningstar.com/etfs/arcx/hnds/portfolio

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions.