Sierra Mutual Funds will be launching its first series of ETFs next year using a process and strategy it has found successful within its tactical multi-asset mutual funds, according to a firm official.
“We are very much looking to launch a similar product line in ETFs,” said James St. Aubin, chief investment officer at Sierra. “We’re looking at that right now and exploring the opportunities in the ETF space and expect to see product from Sierra in the ETF world soon.”
Last week, the Santa Monica, Calif.-based firm launched its Sierra Tactical Core Growth Fund (STEJX), a mutual fund that can invest up to 100% in global equity funds under favorable market conditions. Now, it is turning its attention toward rolling out a lineup of ETFs.
“We wanted to make sure that we finished our suit of mutual funds and then went on to build a similar product line in the ETF space,” St. Aubin said.
Over the past two years, the firm has been building its suite of tactical multi-asset mutual funds that incorporate a unique tactical investment approach to achieve favorable results while minimizing downside risk. With rising interest in the strategy and ETFs, advisors have been asking Sierra to combine the two.
That process involves buying and selling the underlying investments, which had been traditionally mutual funds and ETFs, when they cross a certain threshold.
“Once the fund’s price falls below its sell signal, it’s sold and removed from the portfolio and doesn’t re-enter our viable buyable universe until it starts to show evidence of an uptrend, which is defined by our buy signal,” St. Aubin said.
While Sierra will migrate its strategy to the ETFs, it will not be copying the funds as there are a number of differences between mutual funds and ETFs, according to St. Aubin.
“It’s not going to look identical,” he said. “We’re not going to make clones of what we have in the mutual fund space [because] there will be some differentiation.”
Up until this point the firm has been using fund of funds for its tactical multi-asset product line. In the ETF versions, the underlying investments will be other ETFs. Another difference is the flexibility of the ETFs. While some of the mutual funds are pre-packaged, advisors will have more flexibility with the ETF counterparts.
“We want to give more of a modular approach … to give advisors the tools to allocate to more segmented parts of the investment universe and put them together in their own way,” St. Aubin said.
The firm plans to start launching its first ETFs early next year.