AdvisorShares has launched an actively managed US equity ETF that utilizes artificial intelligence to guide portfolio construction.
Wayne Ferbert, Founder and Managing Director of Alpha DNA Investment Management.
The AdvisorShares Alpha DNA Equity Sentiment ETF (SENT US) has listed on NYSE Arca and comes with an expense ratio of 1.12%.
The fund is sub-advised by Alpha DNA Investment Management, a Columbia, Maryland-based quantitative manager specializing in applying AI to create better portfolio outcomes.
Alpha DNA employs a systematic security selection methodology based on proprietary machine-learning techniques. These AI-driven algorithms examine a company’s alternative digital data sources, such as Twitter feeds, web traffic, and search engine results, to determine consumer sentiment for that firm.
Combined with an analysis of financial fundamentals, the process aims to identify companies that are believed to be growing faster than the average growth currently predicted by Wall Street analysts.
The ETF is expected to invest across all three major size segments of the US equity market, while stocks within each segment are expected to be equally weighted. As of 2 February, large-caps accounted for roughly two-thirds (68.0%) of the portfolio, while mid-caps and small-caps had weights of 19.4% and 12.6% respectively.
The fund is dominated by stocks from two growth-leaning sectors: information technology (36.4%) and consumer discretionary (28.6%). The next largest sector weights are communication services (9.8%), health care (9.0%), and consumer staples (7.5%).
The ETF also adopts a risk management overlay which consists of purchasing put options either on major market indices such as the S&P 500 or Russell 2000 or ETFs that track these benchmarks. The options overlay is designed to protect the portfolio against material market declines.
Overall, the fund seeks to provide a competitive risk-adjusted return over a full market cycle (defined as three to five years) relative to the Russell 3000 Index with lower volatility than traditional long-only equity strategies.
Noah Hamman, CEO of AdvisorShares, commented: “Alpha DNA’s highly specialized portfolio management delivered within the benefits of an ETF vehicle adds another dimension to our equity strategy line-up. We believe SENT offers a compelling, long-term core equity solution for advisors and investors seeking to mitigate portfolio risk and withstand unexpected volatility, especially important in this market environment.”
Wayne Ferbert, Founder and Managing Director of Alpha DNA Investment Management, added: “In managing SENT, we always stay invested to provide equity participation in bull markets and always stay hedged to mitigate downside when markets turn bearish. Our unique investment approach removes any emotion from decision-making and any need for market timing in an effort to provide SENT shareholders with the peace of mind to stay the course in reaching their investment goals.”