WeatherStorm launches long-short forensic accounting ETF

Jul 23rd, 2015 | By | Category: Equities

WeatherStorm Capital, a subsidiary of US-based investment fiirm Vident Financial, has launched the WeatherStorm Forensic Accounting Long-Short ETF (FLAG) on Nasdaq.

WeatherStorm changes forensic accounting ETF to long-short

WeatherStorm’s forensic accounting ETF now has the capability to go short the lowest ranked companies.

The fund seeks to provide US large-cap equity exposure while enhancing returns through stock selection based on forensic accounting analysis.

Long equity positions up to 130% of the fund’s value can be taken, while short positions up to the value of 30% offset this. This 130/30 long-short strategy results is a portfolio with a market exposure to broad US large-cap equities and an amplified ability for the stock selection strategy to add or detract from returns.

Andrew Alden, WeatherStorm’s Head of Quantitative Research, commented: “We are excited to offer investors an efficient and transparent way to utilise forensic accounting in their US large-cap investing. Investors will be able to utilise the fund as a core strategic tool while harnessing factors with enhanced risk-adjusted returns potential.”

The methodology uses accounting data to select long and short positions on measures of fundamental quality. The investable universe is scored and ranked on the following attributes: cash flows, revenue, earnings quality, shareholder yield, adjusted earnings surprise and valuation. The top ranked companies generally constitute the long positions while the bottom ranked companies are shorted. The goal is to identify and short companies exhibiting “red flags” of aggressive accounting and revenue recognition practices which are often used by managers to boost short-term results at the cost of future performance.

“We view forensic accounting as a way to measure corporate honesty. The method and construction of this portfolio really gets behind the numbers and is reflective of a company’s leadership and governance,” explained Nicholas Stonestreet, CEO of Vident Financial.

The fund has a total annual fund operating expense ratio of 0.92%.

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