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Little Harbor Advisors launches ETF that calculates probability of change in price direction of U.S. equities

Thursday, April 05, 2018
Opalesque Industry Update - Investment firm Little Harbor Advisors, LLC has launched its first exchange-traded fund. The fund uses Bayesian statistical techniques to infer the probability of change in price direction of the broad U.S. equity market. The LHA Market State U.S. Tactical ETF applies these techniques to the U.S. equity market to manage the net-long exposure of the MSUS ranging between zero (out of the market) and 160%.

MSUS seeks to provide investment results that exceed the total return performance of the broader U.S. equity market on a risk-adjusted basis. MSUS will attempt to achieve this objective by seeking to reduce net exposure to the U.S. equity market in order to minimize losses in market downdrafts and to enhance net exposure and returns during market rallies.

The statistical techniques employed look at the changing distribution of price movements in the S&P® 500 as described by the four moments of a distribution. The fund seeks to take advantage of statistical indications of growing left-tail risk and increasing volatility by trimming net exposure in a timely fashion, or to take advantage of statistical indications of positive skew to enhance returns by opportunistically increasing net exposure to greater than 100%.

The LHA Market State Fund I, LP, a private fund, will make an investment of approximately U.S. $6 million into the new ETF.

According to Little Harbor's Chief Investment Officer-Jeff Landle, CFA, "Investors seeking long-term exposure to the U.S. equity market generally have a choice between 100% long 100% of the time, and/or a systematic approach to exposure management in an effort to deliver better risk-adjusted returns by attempting to avoid unfavorable market conditions while taking advantage of more favorable times. To maximize returns investors want to not only generate gains when the market goes up, but, importantly, to lessen losses when the market goes down."

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