Gadsden LLC, a RIA in suburban Philadelphia, has entered the ultra-competitive exchange-traded fund space with two new actively managed products that offer institutional-like approaches to retail investors.

With both the Gadsden Dynamic Growth ETF (GDG) and Gadsden Dynamic Multi-Asset ETF (GDMA), roughly 80 percent of their respective portfolios are in a strategic sleeve based on a long-term view of macroeconomic factors, typically a period of more than three years. The remaining 20 percent or so is considered a tactical sleeve based on a short-term view of the market, providing the option to move in and out of positions to help provide a smoother ride in choppy markets.

“GDMA is along the lines of an all-weather asset allocation approach, while GDG is more tactical and less constrained, and is designed to take advantage of seasonal tendencies we’ve seen with asset classes,” says James Judge, senior director and portfolio manager at Gadsden, an investment advisor and asset management firm in Wayne, Pa., with $750 million in regulatory assets within its affiliated entities.

“Our models for advisors are what we call seasonally balanced, or business cycle balanced,” Judge says. “At its core, our approach to diversification is meant to deliver results regardless of the stage of the business cycle we’re in."

GDMA’s strategic sleeve invests in a variety of asset classes—including currencies, equities, fixed income, real assets and commodities—across different geographies and market capitalizations based on Gadsden’s view of their long-term correlation and sensitivity to macroeconomic factors such as inflation, employment and interest rates.

GDG’s strategic sleeve invests in those global equity markets where the fund managers see potential for longer-term growth.

“The GDG launch is timely because its underlying strategy tends to perform best in turbulent markets because it can go long and short,” Judge says. “The tactical side gives us the flexibility to read the tea leaves and determine what stage of the market cycle we’re in, and express the strategy in a way that can benefit from both long and short exposures.

“As equities begin to deteriorate we’ll likely add short equity exposures,” he adds. “We strongly believe we’re in the latter stages of the market cycle, and we’re seeing traditional characteristics and red flags pop up, and we’re prepared to take advantage of themes that are playing out.”

The portfolios of both funds blend fundamental and quantitative methods to select investments. And the portfolios are constructed in partnership between Gadsden and Vident Investment Advisory LLC, which is a sub-advisor for a sizable number of ETFs.

Gadsden provides the macro exposure guidance on which market segments and asset classes to include in the strategic and tactical sleeves, while Vident picks the securities and executes the trades.

“We’re not stock or securities pickers; we’re asset allocators,” Judge says. “At the end of the day we’re targeting index-level exposures across a broad variety of asset classes.”

The portfolios of both ETFs reflect Gadsden’s current cautious view on equities. “We’re running our strategies about 20 to 25 percent lower risk than our long-term target, and we’ve been doing that since mid-summer due to our concerns about the liquidity cycle and the [interest rate] tightening going on in the U.S.”

U.S. Treasury bills comprise the largest holdings by far in both ETFs—roughly 32 percent in the Dynamic Growth ETF and 35 percent in the Dynamic Multi-Asset ETF. The rest of their respective portfolios comprise equity and fixed-income ETFs, along with other fixed-income instruments and cash.

“Some of that [portfolio allocation] is being achieved with ETFs, but that can easily be achieved using futures or other instruments giving us index-level exposures.”

The Gadsden Dynamic Growth ETF charges an expense ratio of 0.88 percent, and the Gadsden Dynamic Multi-Asset ETF charges 0.71 percent.

Judge and his co-portfolio manager of the funds, Kevin Harper, had prior experience in the institutional money management space at Forefront Analytics in nearby Conshohocken, Pa., as well as at hedge funds and a long-only institutional manager handling money for pensions, foundations and endowments.

They aim to bring institutional-type portfolios to financial advisors and their clients at an affordable price.

Judge says that Gadsden is targeting its ETFs to independent financial advisors and those within wirehouses (which he acknowledges will be a tough nut to crack), as well as advisors using investment platforms such as Envestnet and others.

“We’re also targeting institutions and family offices because of our experience in working with billion-dollar institutions,” he notes.