According to a press release from the New York-based firm, the Sector Rotation Portfolio (SRP) invests in one or more of ten sectors derived from the S&P 500 Global Industry Classification Structure, and the Country Rotation Portfolio (CRP) invests in up to 13 developed foreign countries.
The SRP uses a strategy in which the portfolio is either invested completely in or out of a sector depending on whether the company has a bullish or bearish view about the sector. If XTF believes that a sector will underperform the seven- to 10-year U.S. Treasury, it will move completely out of that sector and into a seven- to 10-year U.S. Treasury ETF. However, if the sector is predicted to outperform the seven- to 10-year U.S. Treasury, XTF will invest in the sector ETF.
XTF will invest 10% in one of the following ten sectors: financials, information technology, health care, consumer staples, telecommunications services, consumer discretionary, materials, industrials utilities, and energy.
The CRP may invest in ETFs that track the following 13 countries: The Netherlands, Germany, France, Switzerland, Italy, United Kingdom, Belgium, Australia, Singapore, Hong Kong, Japan, Canada, and South Africa. The portfolio is meant to take advantage of changes in the risk and the appreciation potential of each country.
According to the release, XTF models each country independently, and compares its risk/reward profile to an equivalent investment in intermediate-term U.S. Treasuries. If the country profile is favorable versus the U.S. Treasury, XTF invests in the country, but if the Treasury fares better, XTF invests in the Treasury instead.
Each country in the CRP is equally weighted at approximately 7.7% of the overall portfolio, and uses the same “all or none” approach on each country as used by the SRP.
“While the SRP and CRP portfolios aren’t designed to function as an investor’s core portfolio, they can provide a very important add-on role, allowing the investor full diversification, across not only one or two sector or country ETFs, but across nearly two dozen,” said Michael Woods, Chief Executive Officer of XTF, in the release.