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RAAX Fund Uses Rules-based Approach for Optimum Allocation

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May. 31 2018, Published 2:28 p.m. ET

VanEck

The VanEck Vectors Real Asset Allocation ETF (RAAX) uses a data-driven, rules-based process that leverages over 50 indicators (technical, macroeconomic and fundamental, commodity price, and sentiment) to allocate across 12 individual real asset segments in five broad real asset sectors. These objective indicators identify the segments with positive expected returns. Then, using correlation and volatility, an optimization process determines the weight to these segments with the goal of creating a portfolio with maximum diversification while reducing risk.

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Market Realist

Real asset funds provide diversification benefits to portfolios

Real asset funds are designed to invest in financial assets that are backed by real assets like commodities (PDBC), real estate (VNQ), infrastructure (IGF), and natural resources (FRAK). Such funds mainly seek to provide relatively higher inflation-adjusted returns. The chart below shows annualized 10-year returns from real assets. Real asset funds provide diversification benefits to portfolios because of their relatively low correlation with financial assets like stocks and bonds and also among each other.

VanEck Vectors Real Asset Allocation ETF

The VanEck Vectors Real Asset Allocation ETF (RAAX) uses a rules-based approach to determine the optimum capital allocation. The fund’s allocation process provides exposure to segments with better returns profile while managing overall portfolio risk.

In this series, we’ll discuss the allocation of RAAX fund in April and May and the relative performance of the fund in those months. We’ll also discuss the sectors on which the fund is bullish and bearish on.

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