Daniel Freedman, director, SPA ETF Plc, comments: âThe SPA MarketGrader 40âs portfolio rebalancing provided some interesting insights into the US market. MarketGrader applies its methodology without being hindered by human emotion. Despite negative sentiment around financials, MarketGrader has increased its allocation to financial institutions from 10% to 18%, as it assessed a number of stocks as being undervalued.â
Neil Michael, head of quantitative strategies, London & Capital, the sister company to SPA ETF, explains: âThe disciplined selection process of evaluating each stock according to its company fundamentals, grouped under âgrowthâ, âprofitabilityâ, âcashflowâ and âvalueâ, has meant that MarketGrader has been able to identify selective stocks that have not been affected by the credit crisis, such as those in insurance. In order to accommodate the increased weighting in the finance sector, it has reduced the weighting of the energy sector, which offers less fundamental attractiveness.â
SPA offers institutional and retail investors access to ETFs based on the fundamentally driven indices created by US research company MarketGraderâs proven quant-based system. The MarketGrader indices are unique because of the sophisticated methodology of weighting and evaluating the stocks. Unlike standard indices, which evaluate stocks based on fixed parameters, MarketGrader uses 24 quantitative filters to carry out a fundamental evaluation of more than 5,700 North American stocks. Each MarketGrader index periodically adjusts its holdings to ensure an equal weighting for, and an optimal grading of, all stocks. This advanced process helps to avoid the pricing anomalies that arise from traditional market-cap weighted indices.