The new fund dynamically adjusts its exposure to different investment styles, such as value, growth, momentum, and quality, to enhance returns and reduce downside risk.
Source: CityWire South Africa | By: Justin Brown
27four last week listed its second Actively Managed Exchange Traded Fund (AMETF) on the Johannesburg Stock Exchange (JSE).
27four listed its first AMETF, the 27four Large Cap Equity AMETF, on the JSE in July. The newly listed 27four SA Multi-Factor Equity AMETF is underpinned by a style rotation strategy that systematically shifts style exposures by using machine learning and style momentum.
‘This approach allows the fund to dynamically adjust exposure to different investment styles, i.e. value, growth, momentum and quality, aiming to enhance returns while also reducing downside risk,’ the JSE said in a statement.
‘The application of a single style investment thesis erodes the core principle of diversification. Style rotation allows flexibility to move across the style spectrum to benefit from the performance variation seen in styles through time.
‘We have developed an approach that leverages data science and machine learning to provide rotation signals, all the while maintaining sufficient exposure to the benchmark,’ according to Daniel Page, head of 27four Beta Solutions.
The 27four SA Multi-Factor Equity AMETF aims to outperform its Capped Swix benchmark. The fund selects shares based on an estimation of future style performance, using machine learning to enhance performance while being benchmark conscious.
The fund typically invests in and holds between 60 and 80 of South Africa’s largest and most liquid stocks and is rebalanced quarterly.
‘We welcome innovative offerings like the 27four SA Multi-Factor Equity AMETF, which is rooted in data and machine learning, to increase the dynamic offerings available to investors,’ said Adèle Hattingh (pictured below), business development and exchange-traded products manager at the JSE.
The new 27four AMETF aims to achieve medium- to long-term, sustainable capital growth by investing in some of the largest and most stable companies listed on the JSE. Using machine learning and a diversified multi-factor investment strategy, the fund seeks to optimise long-term returns for investors.
The latest AMETF listing brings the number of ETFs listed on the JSE to 106, with a market capitalisation of R179bn.