If You Invested in Hedgeye 130/30 Equity ETF (HELS)

Hedgeye 130/30 Equity ETF (HELS) is an actively managed exchange-traded fund launched by Hedgeye Asset Management, LLC ("HAM"), a subsidiary of Hedgeye Risk Management, LLC. According to the fund’s launch announcement, HELS is designed to pursue long-term capital appreciation through a disciplined 130/30 active extension equity strategy.

Investment Objective and Core Strategy

The stated investment objective of the Hedgeye 130/30 Equity ETF is long-term capital appreciation. The fund seeks to move beyond traditional long-only equity approaches by combining a high-conviction long portfolio with a targeted short book. HELS is structured to maintain approximately 130% gross long exposure and 30% short exposure, resulting in about 100% net market exposure.

Short sale proceeds are reinvested into the fund’s most compelling long ideas. This structure allows the portfolio to tilt more heavily toward companies that Hedgeye identifies as structural winners while shorting securities that, in the manager’s view, exhibit deteriorating fundamentals, negative Signals, or adverse cycle dynamics. The strategy aims to capture return potential on both the long and short sides of the portfolio.

Research and Portfolio Construction Framework

The fund’s process incorporates Hedgeye’s macro research and quantitative tools. The launch materials state that HELS employs Hedgeye’s macro research process and quantitative Signals framework to inform both long and short exposures. The strategy integrates macro modeling, quantitative indicators, and security-specific research into a forward-looking, risk-managed equity process.

Within this framework, "Quads" refers to the evolving locations of national economies within four-quadrant plots that compare rates of change in real GDP with rates of change in inflation measures. "Signals" refers to a defined set of security-specific indicators that the manager deems useful in estimating the future price trajectory of securities in the fund’s selection universe, including certain proprietary indicators.

Active Extension and Risk Considerations

HELS is described as an active extension strategy that allows the manager to express both positive and negative stock-specific views. By combining a 130% long book with a 30% short book, the fund seeks to generate a more efficient risk/return profile than a traditional long-only equity strategy, while maintaining net exposure near 100%.

The fund’s documentation highlights that investing involves risks, including the risk of principal loss. The adviser is newly formed and has not previously managed an ETF, which is identified as a specific risk for investors. The fund is also non-diversified, meaning it may invest a large percentage of its assets in a particular issuer, which can increase the impact of poor performance from a limited number of investments.

Use of Quantitative Models and Derivatives

The fund’s investment strategies may employ quantitative algorithms and models that rely on both proprietary and non-proprietary data. The launch information notes that such models may have hidden biases or exposure to structural or sentiment shifts, and there is no assurance that the use of quantitative models will enable the fund to achieve positive returns or outperform the market.

HELS may invest in derivative instruments, such as futures contracts, forward contracts, and swaps. These instruments can create leveraged exposure, meaning gains or losses may exceed the amount invested in the derivative based on changes in the underlying asset, index, or rate. The fund’s materials identify derivatives risk, options risk, futures contract risk, and swap agreements risk as principal risks.

Short Selling and Leverage Risks

The strategy’s use of short selling introduces additional risks. Short sales involve potentially unlimited risk because the maximum price of a security sold short is not capped. If the price of a shorted security rises, the fund may incur losses when covering the position. The fund may also face short squeeze risk, including difficulties in borrowing securities to establish short positions or being forced to close positions at unfavorable prices if borrowed securities are recalled.

Although the fund does not seek leveraged returns as a primary objective, its use of certain derivatives may create investment leverage. This can increase the sensitivity of the fund’s net asset value to market movements.

ETF Structure and Trading Characteristics

As an exchange-traded fund, HELS is subject to risks specific to the ETF structure. The launch disclosure notes that shares may trade at a premium or discount to net asset value, that an active secondary market may not develop or be maintained, and that trading may be halted by the exchange on which the shares trade. Shares are bought and sold at market price rather than net asset value and are not individually redeemed from the ETF. Brokerage commissions can reduce investor returns.

The fund is described as a recently organized management investment company with no operating history. Prospective investors are directed in the launch materials to review the statutory and summary prospectus for detailed information on the investment objective, risks, charges, and expenses.

Management and Sponsorship

Hedgeye Asset Management, LLC serves as the adviser to the Hedgeye 130/30 Equity ETF. The fund is managed under R. Patrick Kent, who is described in the launch announcement as an investment professional with experience managing long/short, active extension, and thematic global equity portfolios. The Distributor for the fund is identified as Foreside Fund Services, LLC.

According to the launch information, Kent’s approach integrates Hedgeye’s macro and stock research into an equity process grounded in quantitative modeling, cycle awareness, and fundamental analysis. The fund’s strategy is presented as a way to apply Hedgeye’s macro Signals and 130/30 framework to pursue long-term equity growth.

Risk Disclosure Emphasis

The launch announcement places emphasis on risk disclosure. It notes that there is no guarantee the adviser’s investment strategy will meet the fund’s objective or produce desired results. It also highlights risks related to company size exposures, including that large-cap companies may be less able than mid- and small-capitalization companies to adapt to changing market conditions, and that mid-cap stocks may experience more abrupt or erratic price movements.

Additional detail on principal investment risks, including derivatives, options, futures, swaps, leverage, short selling, and ETF-specific risks, is referenced as being available in the "Principal Investment Risks" section of the prospectus. The fund’s materials stress the importance of reviewing these documents before investing.