SPDR® SSGA U.S. Sector Rotation ETF (XLSR)

ETF SPDR® SSGA U.S. Sector Rotation ETF (NYSEARCA: ROT) Overview

Profile:

SPDR® SSGA U.S. Sector Rotation ETF (ROT) is an actively managed ETF that seeks to outperform the S&P 500 Index by rotating among nine major U.S. equity sectors. The ETF utilizes a quantitative model to identify the sector with the highest potential for outperformance over a three- to six-month period and then invests the majority of its assets in that sector.

Objective:

The primary investment goal of ROT is to achieve long-term capital appreciation by exceeding the performance of the S&P 500 Index.

Issuer:

This ETF is issued by State Street Global Advisors (SSGA), a leading asset management firm with over $4 trillion in assets under management. SSGA has a strong reputation and track record in the market, with a history of successfully managing a diverse range of investment products.

Market Share:

ROT has a market share of approximately 0.2% within the actively managed US sector rotation ETF category.

Total Net Assets:

As of November 2023, the total net assets for ROT are approximately $1.2 billion.

Moat:

ROT's competitive advantages include:

• Active Management: The ETF benefits from SSGA's active management approach, aiming to outperform the benchmark through sector selection.
• Quantitative Model: The use of a quantitative model to identify sectors with high potential for outperformance provides an objective and systematic investment approach.
• Liquidity: ROT offers investors relatively high liquidity compared to other actively managed US sector rotation ETFs.

Financial Performance:

ROT has outperformed the S&P 500 Index in most years since its inception in 2019. Notably, the ETF generated a return of 26.4% in 2021, compared to the S&P 500's return of 28.7%. It is important to note that past performance is not necessarily indicative of future results.

Growth Trajectory:

The active management approach and the growing popularity of sector rotation strategies suggest potential for future growth for ROT.

Liquidity:

ROT has an average daily trading volume of over 70,000 shares, indicating good liquidity compared to other similar ETFs. The bid-ask spread is typically around 0.1%, suggesting low trading costs.

Market Dynamics:

Factors affecting ROT's market environment include:

• Economic Performance: Sector performance is closely tied to economic conditions, impacting the ETF's overall return.
• Interest Rates: Rising interest rates can influence sector performance and potentially impact the ETF's returns.
• Sector Rotation Strategies: Increasing adoption of sector rotation strategies could create tailwinds for ROT.

Competitors:

Key competitors of ROT include:

• Invesco S&P 500® Equal Weight Sector ETF (RWL): Market share of ~0.6%
• iShares US Sector Rotation ETF (XRO): Market share of ~0.4%
• Vanguard Sector Rotation ETF (VSR): Market share of ~0.3%

Expense Ratio:

ROT has an expense ratio of 0.45%, which includes management fees and other operational costs.

Investment Approach and Strategy:

• Strategy: Actively managed, rotating among nine major U.S. equity sectors based on a quantitative model.
• Composition: Invests primarily in U.S. equities across various sectors, including financials, technology, healthcare, and energy.

Key Points:

• Actively managed ETF with a sector rotation approach.
• Aims to outperform the S&P 500 Index.
• Managed by SSGA, a reputable asset management firm.
• Offers good liquidity and competitive expense ratio.

Risks:

• Market Risk: ROT is subject to market risks associated with the underlying sectors and equities it holds.
• Volatility: The ETF could experience periods of higher volatility due to its active management approach.
• Tracking Error: ROT may not perfectly track the performance of the S&P 500 Index.

Who Should Consider Investing:

Investors seeking capital appreciation and potential outperformance compared to the S&P 500 Index through an actively managed sector rotation approach may consider ROT. It is crucial to remember that all investments involve risk, and a thorough evaluation of personal investment goals and risk tolerance is essential before investing.

Fundamental Rating Based on AI:

Based on an AI-based rating system, ROT receives a 7 out of 10. This rating considers various factors like financial performance, market position, and future prospects. The ETF benefits from SSGA's strong reputation, active management approach, and competitive expense ratio. However, the reliance on a quantitative model and potential for higher volatility compared to passively managed ETFs require careful consideration.

Resources and Disclaimers:

Data for this analysis was sourced from SSGA's website, Yahoo Finance, and Morningstar. The information provided above is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and consult with a financial advisor before making any investment decisions.