Hedgeye Asset Management launches active ETF

Stamford-based Hedgeye Asset Management has introduced the Hedgeye Index Adds ETF (ADDS), an actively managed fund designed to capitalize on market dynamics surrounding index reconstitutions. The strategy aims for long-term capital appreciation by positioning ahead of expected buying from index-tracking funds when companies are added to major U.S. equity benchmarks.

ADDS targets a specific market inefficiency that can arise when widely followed indices—such as the S&P 500, S&P 400, S&P 600, and Nasdaq 100—add new constituents. Benchmark-tracking vehicles often must acquire shares of these companies, potentially creating demand surges. The fund seeks to anticipate these additions before they are finalized and typically exits positions at the market-on-close on the day a company enters its target index.

Hedgeye Asset Management describes ADDS as a focused, process-driven strategy built to pursue an overlooked source of return. Leadership emphasizes that the approach is disciplined and differentiated, rather than a generic equity exposure, with the objective of implementing a repeatable method around the timing of passive flows.

The fund is managed by portfolio manager Brooks Cutright, whose career spans nearly two decades in index-event trading and related roles across both buy- and sell-side institutions. His experience includes portfolio management positions and leadership in ETF trading and risk management at major financial firms.

ADDS employs proprietary machine learning models to forecast companies that are likely to be added to the indices it monitors. The portfolio generally holds about 40 U.S. equities that either currently satisfy, or are on the path to satisfying, eligibility criteria for inclusion in prominent U.S. equity indices.

• Portfolio construction: approximately 40 U.S. equities focused on prospective index additions
• Explicit constraint: the fund does not hold current S&P 500 constituents
• Risk parameters: 20% per-name cap and a disciplined liquidity framework
• Process cadence: monthly rebalance cycle

According to the portfolio team, the core opportunity is straightforward to grasp yet difficult to execute consistently: index additions can trigger meaningful, rules-based demand from passive vehicles. ADDS is built to anticipate these events in a systematic manner, size positions with risk discipline, and exit when the anticipated flow catalyst occurs.

Positioned as a complement to a core equity allocation, the strategy seeks returns driven by flow timing rather than conventional security selection. It reflects Hedgeye Asset Management’s broader focus on combining research, process, and risk management to build actively managed solutions.

Firm leadership underscores that ADDS is designed with a singular purpose and a systematic playbook, aiming to deliver exposure to a distinct return source with the level of risk discipline investors expect from an institutional process.