Of course, if the cyclical rotation revives, MTUM will be well-placed to capitalize. Many on Wall Street think the reflation trade will recover, even as investors appear to be scaling back their expectations. MTUM was 0.8% higher as of 9:42 a.m. in New York on Wednesday.
Meanwhile, the fund’s scheduling headaches are far from unique. In the $1.4 trillion smart-beta universe, almost 20% of funds rebalance semiannually, according to Bloomberg Intelligence. About one in 10 adjusts annually.
That meant the huge market rotation since the first Covid vaccine breakthrough in November set up a series of major index adjustments that played out in recent months. MTUM’s was simply the most eye-catching.
“MTUM’s returns since the end of May reveal a potential shortcoming with smart beta: the reliance on a specific rebalance schedule,” BI analysts Athanasios Psarofagis and Eric Balchunas wrote this week. The pair predict future launches will tend toward “more active-like factor ETFs that don’t have to overhaul portfolios on a specific date.”
--With assistance from Justina Lee.
This article was provided by Bloomberg News.