AUSF - AUSF: Interesting Multi-Factor Strategy But Hardly Compelling Returns

2024-03-18 20:14:32 ET

Summary

• Passively managed AUSF has a multi-factor equity strategy revolving around value, momentum, and low volatility that has not translated into consistent outperformance in the past.
• The ETF currently has a tilt toward less expensive, less volatile stocks with unappealing growth characteristics.
• The paradox is that AUSF emerged from the 2022 bear market almost unscathed, but still delivered the worst maximum drawdown in the ETF group discussed in the article.
• As I see little justification for a Buy rating assuming questionable performance, yet there are not enough arguments for a Sell rating either, the golden mean of a Hold rating is to be chosen.

My dear long-term readers certainly remember that I pay special attention to multi-factor equity exchange-traded funds. Today, I would like to assess yet another such vehicle, the Global X Adaptive U.S. Factor ETF ( AUSF ). I initiate coverage with a Hold rating, as I am frankly unimpressed by its total returns. I believe its inability to beat the iShares Core S&P 500 ETF ( IVV ) consistently in the past was most likely the consequence of the backward-looking approach of its underlying index. It did not fully protect it from steep drawdowns amid sell-offs as well. Besides, I was surprised by the fact that AUSF currently has more of a contrarian tilt as it almost entirely ignores the Magnificent Seven group and more growthier stocks, favoring less expensive, less volatile names....

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