Toews Corporation brings actively managed ETFs in Agility Shares launch – plans semi-transparent model launch

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US investment money management firm Toews Corporation, with USD1.8 billion under management, has marched into the ETF arena with the launch of its Agility Shares family of ETFs, specifically the Agility Shares Managed Risk ETF (MRSK) and the Agility Shares Dynamic Tactical Income ETF (THY).

Phillip Toews founded his firm in 1994 and has been managing money with a focus on downside risk mitigation. The ETF launches come in answer to requests from the 1200 odd army of financial advisers who use their mutual funds and SMAs. As a result, the products have seen some USD45 million raised within the first week.

Toews describes mutual funds as Buicks, but ETFs as Teslas. 

“Our strategies are distinct,” he says. 

The Agility Shares Managed Risk ETF (MRSK) with a fee of 1.26 basis points (.96 after fee waiver), seeks to provide index-like returns, with embedded put options to attempt to limit losses in a market downturn through a rules-based methodology.

The Agility Shares Dynamic Tactical Income ETF (THY), with a fee of 1.46 basis points (1.16 after fee waiver), seeks to provide investors with exposure to the high-yield bond market, while attempting to manage risk through utilising a price-reactive strategy that helps the portfolio management team determine trade execution and asset allocation based on a proprietary algorithm.

Through the price-reactive strategy, THY seeks market exposure through high-yield bond instruments and attempts to switch to investment-grade bond instruments or cash equivalents during market downturns to potentially limit the risk of losses.

The primary objective is to provide income for investors, with a secondary objective of attempting to limit the risk of extreme losses.

“With THY, we are distinct because we have produced the first ETF which will fully exit high yield bonds,” Toews says. “The ability to exit provides advisers with an option to expand their yields from a dismal level to something that might produce a real return and the structure means we can attempt to reduce exposure to risk events like we have seen recently.

“Advisers are looking for yield and stability and high yield bonds can go down pretty aggressively so the ability to move to the sidelines to a cash equivalent is an important feature for a lot of advisers.” 

MRSK is designed to deal with some of the problems thrown up by the popular buffered ETF sector.

“What do you do with a buffered ETF if you buy something with a 10 per cent buffer and the market moves down 10 per cent? You no longer have protection,” Toews says. “The problem advisers are running into is that those strategies require dynamic management. It can also apply if you have a cap and markets roar ahead – you can be left not knowing what to do. This is a dynamically managed hedging strategy.”

The strategy has been running since 2018. “It means that advisers can take a position in the market without having to actively manage it.”

The new products come against a background of a lot of investor behaviour studies, Toews says. “What this strategy does is it fits better with investors’ behavioural profiles rather than just buying the market and accepting what it has to offer.”

The products are listed on CBOE, potentially keeping the fees lower than if listed elsewhere, Toews says, and an equity product is on the books for launch over the next three to six months, an unconstrained tactical equity ETF.

The firm looked at the semi-transparent structures on offer but was keen to keep the costs down and also had a concern that a lot of platforms were not automatically onboarding them yet. 

“Because of the complexities of the pricing, we wanted immediate ubiquitous exposure,” Toews says. “But in the future, we can see more ubiquity of listings and we would like to develop and launch our own semi-transparent model.”

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