South African financial services group 27four has listed its second Actively Managed Exchange Traded Fund (AMETF) on the Johannesburg Stock Exchange (JSE).
The newly listed 27four SA Multi-Factor Equity AMETF is underpinned by a style rotation strategy that systematically shifts style exposures through the use of machine learning and style momentum. This approach allows the fund to dynamically adjust exposure to different investment styles, such as value, growth, momentum and quality, aiming to enhance returns while also reducing downside risk.
“The application of a single style investment thesis erodes the core principle of diversification. Style rotation allows for the flexibility to move across the style spectrum in attempt 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,” says Professor Daniel Page, head of 27four beta solutions at 27four.
The 27four SA Multi-Factor Equity AMETF aims to outperform its benchmark, the Capped SWIX. The fund selects shares through the estimation of future style performance using machine learning in order to enhance performance while being benchmark cognizant. The fund typically invests and holds between 60 to 80 of South Africa’s largest and most liquid stocks and is rebalanced quarterly.
“The JSE is committed to innovation and driving transformation. We firmly believe smart technology is an enabler for business. 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,” says Adèle Hattingh, business development and exchange traded products manager at the JSE.
The 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. By using machine learning and a diversified multi-factor investment strategy, the fund seeks to optimize returns for investors over the long term.