SOURCE: QuantShares


September 07, 2011 10:00 ET

QuantShares, New Market-Neutral ETFs, Isolate Factors like Beta and Momentum

Among First ETFs to Hold Short Positions, They Offer Hedging and Diversification for Institutions and Individuals

BOSTON, MA--(Marketwire - Sep 7, 2011) - QuantShares, a family of seven market-neutral exchange-traded funds based on specific factors -- momentum, quality, size, value and beta -- is being introduced by FFCM LLC.

The Momentum, Anti-Momentum, Quality and Size ETFs were launched today. FFCM expects the Value, Beta and Anti-Beta Funds will be available within a week.

QuantShares are among the first ETFs to hold short equity positions, according to FFCM. They are market-neutral and dollar-neutral, holding long and short positions in equal dollar amounts.

The ETFs offer investors strategies that are uncorrelated to the performance of the overall equity market. They are the first products from FFCM, an investment advisor formed in 2010 that specializes in quantitative market-neutral strategies.

"QuantShares are the first ETFs that isolate factor returns," said Bill DeRoche, FFCM's CEO. "They offer a low-cost, transparent way to hedge risk and seek to produce spread returns that are independent of the market's direction."

He expects the funds will initially attract institutional investors and professional investors, including mutual funds, hedge funds, pension funds and wealth managers.

Each fund holds approximately 200 long positions and 200 short positions in stocks chosen from the Dow Jones U.S. Market Index. FFCM licenses the seven indexes from the Dow Jones U.S. Thematic Market Neutral Indexes. Stocks ranked highest for their factor are bought, while those with the lowest rankings are sold short.

Whether the overall stock market is up, down or directionless, the funds seek to have a positive return when the long positions outperform the short positions, DeRoche said. However, if the opposite occurred, the Fund would generate a negative return. The performance of the Funds will depend on the differences in returns between these long positions and short positions.

The funds are passively managed and equal weighted, with the same amount in each stock, regardless of market capitalization. They're also sector-neutral by balancing the long and short positions within a sector.

"We believe that factor-based investing has the potential to produce stronger risk-adjusted returns than the overall market," DeRoche said. "Factors drive from 60 percent to 80 percent of a stock's return, according to our research."

More information is online at The funds launched today are

  • QuantShares U.S. Market Neutral Momentum Fund (MOM) -- Buys high-momentum stocks; shorts low momentum stocks, based on total return over a year.
  • QuantShares U.S. Market Neutral Anti-Momentum Fund (NOMO) -- Buys low-momentum stocks; shorts high-momentum stocks, based on total return over a year.
  • QuantShares U.S. Market Neutral Size Fund (SIZ) -- Buys smallest market-capitalization stocks in the index; shorts the largest stocks in the index.
  • QuantShares U.S. Market Neutral Quality Fund (QLT) -- Securities are selected by combining equally the ranks of return on equity (highest to lowest) and debt-to-equity (lowest to highest). Buys highest-quality stocks; shorts lowest-quality stocks.

The Funds expected to be available next week are

  • QuantShares U.S. Market Neutral Beta Fund (BTAH) -- Buys high-beta stocks; shorts low-beta stocks.
  • QuantShares U.S. Market Neutral Anti-Beta Fund (BTAL) -- Buys low-beta stocks; shorts high-beta stocks.
  • QuantShares U.S. Market Neutral Value Fund (CHEP) -- Buys stocks ranked least expensive (undervalued) according to standard valuation measures; shorts the most expensive stocks (overvalued).

Boston-based FFCM's management team is experienced in quantitative analysis, trading and portfolio management. The principals formerly held positions with State Street Global Advisors Putnam Investments, Platinum Grove Asset Management, AQR Capital Management, Morgan Stanley and Goldman Sachs.

Dow Jones Indexes is the index provider. J.P. Morgan provides custody and fund administration services. Credit Suisse and J.P. Morgan are the prime brokers.

For more information on QuantShares, contact FFCM at 617-292-9801.

Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectuses which can be obtained by visiting the Funds' website at Please read the prospectus carefully before you invest.

ETFs are subject to commission costs each time a "buy" or "sell" is executed. Depending on the amount of trading activity, the low costs of ETFs may be outweighed by commissions and related trading costs.

There is no guarantee that the Funds will achieve their objective. An investment in the Funds is subject to risk including the possible loss of principal amount invested. The risks associated with each Fund are detailed in the prospectuses and include tracking error risk, mid-cap risk, industry concentration risk, market neutral style risk, short sale risk and specific risks related to exchange traded funds. There is a risk that during a "bull" market, when most equity securities and long-only equity ETFs are increasing in value, the Fund's short position will likely cause the Fund to underperform the overall U.S. equity market and such ETFs. Newly organized, the Fund has no trading history and there can be no assurance that active trading markets will be developed or maintained. The Fund may not be suitable for all investors.

Beta is a measure of an asset's sensitivity to an underlying index. Long is purchasing a stock with the expectation that it is going to rise in value. Short is selling a stock with the expectation of profiting by buying it back later at a lower price. Return on equity measures a company's profitability by showing how much profit a company generates with the money invested by shareholders. Debt to equity measures a company's financial leverage indicating the proportion of equity and debt the company is using to finance its assets. A market neutral portfolio aims to generate a positive spread between the return of the long portfolio and the return of the short portfolio.

Distributor: Foreside Funds Services, LLC

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