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Rating:An Active ETF Shop Plans an ETF-of-ETFs Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, October 12, 2016

An Active ETF Shop Plans an ETF-of-ETFs

Reported by Neil Anderson, Managing Editor

An active ETF shop is planning to create a fund-of-funds ETF.

Wesley Gray
Alpha Architect
Chief Executive Officer and Chief Investment Officer
Wes Gray, CEO and chief investment officer of Alpha Architect, confirms that the Broomall, Pennsylvania-based quant shop is prepping a kind of ETF-of-ETFs that would invest in all four of Alpha Architect's existing four ETFs while adding an overlay for trends and downside protection. For now, the ball is in the SEC's court. (Gray declined to go into details for regulatory reasons.)

Alpha Architect has more than $400 million in AUM, including about $140 million in its ETFs.

Alpha Architect's four ETFs, Gray tells MFWire, were meant to be invested in together as a system, balancing value and momentum. The firm specializes in what Gray calls "affordable active alpha: super high conviction, high concentration factor exposures for value and momentum."

"When combined they're like yin and yang [with] a huge diversification benefit," Gray says.

Gray, an alumnus of UPenn and the University of Chicago and a U.S. Marine Corps veteran, became a finance professor before starting his firm.

"We got seeded in 2012 by a huge family office," Gray says. "They just found us from reading my blog."

Also in 2012, Alpha Architect started running a quantitative value strategy, based on a book by Gray, and offered that strategy in separately managed account form. Yet two years later Gray moved into the ETF space, thanks in part to an additional backer.

"We got a VC [venture capital] investment for around $1 million," providing working capital to build an ETF business, Gray says.

Technically, Gray's ETF business is a separate entity, Empowered Funds, that is 20-percent owned by that venture capital firm and 80-percent owned by the Alpha Architect folks. Yet Empowered uses Alpha Architect as its dba, and the ETFs are branded as Alpha Architect ETFs.

On the mutual fund vendor side, Alpha Architect's ETF business is supported by U.S. Bancorp and its Quasar Distributors arm. 

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