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.