It's not a "low-beta" fund (which would be something like, say, SPLV or SIXL that simply owns a bunch of low-beta stocks but still has some market beta). The index it is based on is specifically an anti-beta index which is designed to go up when beta and/or vol increases in the US stock market as a whole (and conversely, generally goes down when vol falls and when higher beta stocks do better than comparable lower beta ones).Error on my part...thank you for keeping me straight.
I still can't get to BTAL being a low beta fund if that argument is being made. At the beginning of the quarterly rebalance it's neutral/no beta and then morphs to whatever the market is going to do with what is being held during the upcoming quarter.
IIRC the "market neutral" in its name simply implies that each sector is (after each rebalance) weighted the same as said sector is in the US stock market (i,e. S&P 500 or Russell 1000...although I believe BTAL actually uses its own definition of "top 1000 stocks" albeit one which is very similar to the Russell 1000); within each of the ten sectors (and within the "long" and "short" buckets for each sector) components are equal weighted.
This is done to avoid sector overweights/underweights (relative to the market as a whole) as might be the case from simply shorting, say, the highest volatility 200 stocks and going long the lowest volatility 200 ones; such a position would have its short side overweighted in tech, communications, and cyclicals and its long side overweighted in utilities, consumer staples, and health care. Performance would then partly be determined by how well specific sectors did vs each other wheres with the actual methodology BTAL uses performance is specifically determined by how well low beta stocks in each sector do vs high beta ones; furthermore, because the sector weightings are designed to mimic the market as a whole there are no sector weight discrepancies vs said market as a whole.
Statistics: Posted by Alpha4 — Sat Apr 06, 2024 2:37 am