Blue Sky AM enters ETF space with ‘QuantX’ fund suite

Jan 30th, 2017 | By | Category: Equities

Colorado-based investment firm Blue Sky Asset Management has launched a suite of five exchange-traded funds under its proprietary “QuantX” brand, becoming the latest player to enter the ETF provider space.

Blue Sky AM enters ETF space with ‘QuantX’ fund suite

Blue Sky Asset Management has rolled out five ETFs under its proprietary ‘QuantX’ brand, offering investors a mix of dynamic beta and risk managed strategies.

Listed on BATS Exchange, the ETFs track indices created by Blue Sky’s research and development team, thereby incorporating various in-house strategies previously only available to investors in a separate account wrapper.

“Investors don’t have an infinite time horizon, which is one of the main reasons we find traditional modern portfolio theory-based approaches to be sub-optimal,” said David Varadi, Director of Research at Blue Sky. “Our dynamic, quantitative approach provides for a more rapid response to changing markets, while filtering out the emotions that can have a negative impact on decision-making.  We have built this intellectual property into the indexes underlying the QuantX ETFs.”

Laura Morrison, Senior Vice President, Global Head of Exchange-Traded Products at Bats, added, “We are delighted to welcome QuantX to the Bats ETF Marketplace, and in this instance, to help bring the company’s proprietary risk management solutions to a broader range of investors. Every market participant should feel sure of their investment decisions, and products like these help to add that extra level of confidence.”

Dynamic Beta Strategy

The QuantX Dynamic Beta US Equity ETF (Bats: XUSA) seeks to create a smarter risk exposure relative to the FTSE/Russell 1000 Index, thereby generating an asymmetric risk profile. The Russell 1000 comprises over 90% of the total market capitalization of all listed US stocks, and is considered a bellwether index for large cap investing.

The strategy uses options market data to identify a basket of large cap US equities with the highest upside volatility relative to their downside volatility. The fund’s index is reconstituted on a monthly basis.

“With XUSA, investors are able to capture key asymmetries in the US equity market, by identifying opportunities for upside participation and lowering downside risk,” said Varadi.

The ETF has a total expense ratio (TER) of 0.59%.

Risk-Managed Strategies

The remaining four funds in Blue Sky’s premier launch harnesses the firm’s flagship “Dynamic Asset Allocation” strategy, seeking to enhance risk-adjusted returns in all market conditions by over-weighting risk assets in periods of market strength, and over-weighting defensive assets in periods of market weakness. The underlying indices have the daily ability to shift their entire constitution to cash or fixed income instruments in an attempt to mitigate downside risk, based on the identification of elevated risks across various exposures.

“While there are other ‘risk-managed’ approaches already on the ETF market, they tend to operate with a long delay, managing risks after they have already started to have a negative impact on a portfolio,” said Keys Tinney, Founder and Managing Partner of Blue Sky Asset Management. “Our approach is truly dynamic. With volatility an ever present risk for investors of all types, we believe it’s time for smarter beta solutions, and we’re very excited to be bringing the QuantX ETF family to market.”

The funds generally invest in other ETFs to gain their required exposure to the selected asset classes. As such the TERs of the funds are relatively elevated due to their inclusion of acquired fund fees and expenses.

The QuantX Risk Managed Multi-Asset Income ETF (Bats: QXMI) seeks to identify top-performing fixed income and equity ETFs in attempting to maximize income and capital growth. TER – 1.12%.

The QuantX Risk Managed Growth ETF (Bats: QXGG) seeks to identify top-performing domestic and international equity ETFs in an attempt to maximize capital growth. TER – 1.22%.

The QuantX Risk Managed Real Return ETF (Bats: QXRR) seeks to capture exposure to real returns by investing in inflation-sensitive assets. TER – 1.22%.

The QuantX Risk Managed Total Return ETF (Bats: QXTR) seeks to provide higher levels of total return from the best-performing asset classes. TER – 1.51%.


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