A recession is nearly guaranteed over the next 12 months, according to The Conference Board. While growth came in higher than expected in late 2022 and early 2023, rising interest rates are catching up to the market and could lead to a slowdown in mid-2023 to early 2024. As a result, investors should gear up to protect their portfolios.
Summit Global Investments’ Dynamic Tactical ETF (DYTA), a newly launched actively-managed portfolio of underlying equity funds in U.S. and foreign markets, could offer the perfect protection. With a 0.95% expense ratio, the fund is pricier than the average active ETF but may offer a unique global strategy in today’s market.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
A Focus on Managed Risk
Summit Global Investments’ Managed Risk Approach aims to improve long-term risk-adjusted returns due to outperformance, lower standard deviations, and reduced drawdowns. After all, it’s usually far easier to mitigate risk than increase returns. And mitigating risk has the extra benefit of producing more consistent performance over time.
S&P Global researchers found that low-volatility strategies offer protection in down markets and participation in up markets. Moreover, they benefit from an asymmetry where return dispersion tends to be above average when low volatility outperforms and below average when low volatility underperforms.
DYTA seeks to reduce risk when fundamental and quantitative signals identify weaknesses within various asset classes or sectors. As needed, the fund managers tactically alternate allocations among the various underlying funds to seek lower volatility than the S&P 500 Index.
Participating in Bull Markets
Tactical allocation also means increasing allocation to specific industries or sectors due to significant upside potential as market or geopolitical conditions vary. Tactical allocation funds seek to perform in line with or better than the market during up periods by investing in promising industries or sectors while maintaining proper risk management.
DYTA may focus on investments in particular industries or sectors due to significant upside potential as market or geopolitical conditions vary. While the firm focuses on risk management, there may be opportunities to generate alpha, particularly in today’s volatile geopolitical environment.
Unlike many traditional ETFs, DYTA is semi-transparent. This classification enables the fund manager to disclose holdings quarterly like a mutual fund, allowing the potential for more significant alpha from its proprietary portfolio strategy. But it still offers the liquidity and tax efficiency of an ETF.
Alternatives to Consider
Tactical allocation is a broad bucket encompassing many strategies. For example, some funds leverage managed futures while others hold a portfolio of equities. So, when choosing funds, you should carefully consider the types of assets you’re comfortable owning and the diversification these assets offer.
Here are some other alternatives to consider.
| Name | Ticker | Assets | Expense | 1 Year Return |
| Adaptive Alpha Opportunities ETF | AGOX | $184.5M | 1.63% | 3.76% |
| Alexis Practical Tactical ETF | LEXI | $62.4M | 1.02% | 2.61% |
| FormulaFolios Tactical Growth ETF | FFTG | $23.5M | 0.95% | 1.67% |
| Cabana Target Leading Sector Conservative ETF | CLSC | $44.6M | 0.69% | -2.54% |
| Arrow DWA Tactical Macro ETF | DWAT | $3M | 1.81% | -3.80% |
The Bottom Line
Summit Global Investments’ Dynamic Tactical ETF (DYTA) is a newly launched, actively-managed portfolio of underlying equity funds in U.S. and foreign markets. With its focus on risk management, the fund could be an attractive option in today’s market, given the potential for a recession in the U.S. over the next 12 months.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
