New York-based ETF issuer Salt Financial has unveiled the Salt Low truBeta US Market Index.
Tony Barchetto, Founder and Chief Investment Officer at Salt Financial.
The index tracks the performance of US stocks with lower volatility relative to the US large-cap universe based on Salt’s proprietary measure of beta – truBeta.
It complements the existing Salt High truBeta US Market Index – an index targeting stocks with high truBeta – which underlies the firm’s debut product, the Salt truBeta High Exposure ETF (SLT US).
SLT was launched on Cboe BZX Exchange earlier this year.
The Low and High truBeta indices share a common selection universe and construction methodology.
The indices select components from a liquidity-screened version of the Solactive US Large and Midcap Index which consists of the top 1,000 stocks in the US ranked by market capitalization.
Salt defines truBeta as the company’s beta forecast for the next quarter, using a blend of intraday, near, and longer-term historical data. Beta for each stock is judged relative to the SPDR S&P 500 ETF (SPY US).
The process is aided by a machine learning algorithm to arrive at what the company believes to be a more responsive and accurate beta forecast.
The indices select 100 constituents (either with the lowest or highest truBeta estimates) which are equally weighted. Rebalancing occurs quarterly with sector exposure capped at 30%.
“The Salt Low and High truBeta indices are designed to target specific levels and characteristics of market sensitivity,” said Tony Barchetto, Founder and Chief Investment Officer at Salt Financial. “For the first time, investors are given the ability to customize their beta exposure with what we believe is a more responsive and accurate market risk measurement, helping optimize the risk/reward trade-offs in their portfolios.”
As is to be expected with low beta investment strategies, the consumer staples (28.6%), utilities (17.3%), and health care (9.3%) sectors feature prominently. Stocks from the financials sector also play a notable role with a weight of 25.7%, their beta estimates being less than normal due to the low interest rate environment.
Salt Financial has yet to file registration papers with the US SEC for the listing of an ETF linked to the low beta index; however, with recent market turbulence leading investors back towards low volatility products, it is likely the firm is keenly watching this space.