Relative Sentiment ETF (Ticker: MOOD) Methodology

The Fund seeks to grow capital by tactically investing in equities, bonds, and gold based on “relative sentiment” factors. In the view of the Fund’s sub-adviser (Relative Sentiment Technologies, LLC), relative sentiment measures the difference in sentiment between institutional and retail investors. The Fund’s portfolio will be tactically allocated among passively-managed U.S. and foreign, developed market equity ETFs, bond ETFs, and, in some instances, gold exchange-traded products (ETPs) as described below:

Equity Allocation Determination

In general, the Sub-Adviser determines the Fund’s equity allocation by taking the average of the following four indicators, each of which can range from 0% (extreme relative bearishness) to 100% (extreme relative bullishness):

  • A positions-based relative sentiment indicator derived from the Commitments of Traders Report
  • A survey-based relative sentiment indicator derived from Sentix sentiment indices
  • A cross-asset relative sentiment indicator derived from non-equity components of the Commitments of Traders Report
  • A retail macro sentiment indicator derived from the Daily Sentiment Index

Bond and Gold Allocations

Once the Sub-Adviser has determined the Fund’s equity allocation, the Sub-Adviser will recommend that the Fund allocate the remainder of its portfolio to broad-based or inflation-protected bond ETFs and, in some instances, to gold exchange-traded products (ETPs).

In particular, the Sub-Adviser will allocate between gold, broad-based bonds, and inflation-protected bonds based on the following indicators:

  • U.S. dollar relative sentiment (derived from the Commitments of Traders Report)
  • Federal Reserve policy sentiment (derived from data on real interest rates)
  • Retail macro sentiment (derived from the Daily Sentiment Index)

For example, if U.S. dollar relative sentiment is bearish and real rates are declining, the Fund will generally allocate the Fund’s non-equity holdings evenly between bond ETFs and gold ETPs. Whereas with respect to intra-bond allocations, the level of retail macro sentiment will determine how bond allocations are apportioned between broad-based and inflation-protected bonds.

Fund Documents

About the Manager

Raymond Micaletti, Ph.D., is the President of Relative Sentiment Technologies, LLC (RST), a firm that focuses on the research and development of relative-sentiment-based tactical asset allocation strategies. Prior to RST, Ray spent the better part of his career developing and managing systematic investment strategies across a variety of categories including quantitative long/short equity, medium-frequency global macro, and tactical asset allocation, at places such as Fortress Investment Group, Barclays Capital, and Columbus Macro. He holds a Ph.D. from Princeton University in Engineering Mechanics and a B.S. in Civil Engineering from the University of Notre Dame.

Raymond Micaletti, Ph.D.

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