DoubleLine Shiller CAPE U.S. Equities ETF (CAPE) seeks to track an index based on the Shiller CAPE (Cyclically Adjusted Price-to-Earnings) ratio methodology, which identifies undervalued U.S. equity sectors by comparing current prices to inflation-adjusted earnings over the past 10 years.
How It Works
The fund uses a quantitative, rules-based approach that ranks U.S. equity sectors by their CAPE ratios, overweighting sectors trading at lower valuations relative to their historical earnings. Portfolio allocations are rebalanced quarterly based on updated CAPE calculations, with the strategy rotating between sectors as valuations change. This active allocation methodology contrasts with traditional market-cap weighting by emphasizing valuation metrics rather than company size.
Key Features
- Applies Nobel laureate Robert Shiller's CAPE methodology to sector rotation, targeting historically cheap market segments
- Quarterly rebalancing based on 10-year cyclically adjusted earnings creates systematic value tilt across sectors
- Recently launched in 2022 with limited performance history but established academic research backing the strategy
Risks
- This ETF can underperform during momentum-driven markets when expensive sectors continue rising, as value strategies often lag growth trends
- Sector concentration risk emerges when CAPE signals favor few sectors, potentially creating 40-60% allocations to single market segments
- Broad equity market declines will impact this fund regardless of sector allocation, with potential 20-40% losses during bear markets
Who Should Own This
Best suited for tactical allocation (5-15% of equity portfolio) by investors with 3+ year time horizons seeking systematic value exposure. Medium-to-high risk tolerance required due to sector concentration and potential style underperformance. Appeals to factor-based investors wanting academic-backed valuation strategy beyond traditional value metrics.