Q:  What is the history of the ETF? A : The Huntington US Equity Rotation Strategy ETF is an actively managed exchange traded fund, launched on July 23, 2012. Our objective is to seek capital appreciation regardless of the market environment. Q:  Would you highlight some of the unique features of the investment product? A : The uniqueness lies in the fact that we try to deliver returns that are better than an index by creating an actively managed fund aiming to outperform our benchmark, the S&P Composite 1500 Index. We seek to achieve this goal by benchmarking 70% of the portfolio to the S&P Composite 1500 Index, while investing 30% in the two best sectors of the index that have, in our opinion, the best chance of outperforming the index. Thus, the real focus of our attention falls on the stocks within the sectors in that 30% portion because the remaining 70% is indexed. Q:  Why does sector rotation play an important part in your strategy? A : Different sectors within the S&P Composite 1500 Index typically outperform the market at various times. Volatility in market indexes, sectors, industries and individual companies varies dramatically based on investor sentiment, economic and business cycles as well as the business environment of individual companies. Knowing that market environments may cause certain sectors or businesses to perform more favorably than others, we try to identify the companies that may experience more profitability given the current economic cycle, so that we can eventually overweight the portfolio in companies within that sector. We employ a top-down approach in our investment process. First of all, we look at the global economy, the U.S. economy and the financial markets before we start monitoring indicators such as gross domestic product, money supply, inflation and interest rates. Based on all that input, we come up with what we believe are the two sectors with the best chance of outperforming the S&P Composite 1500 Index over the next 12 months. Q:  Which are the sectors that you tend to invest in? A : The fund invests in companies operating in each of the ten sectors represented in the benchmark. These sectors are: utilities, consumer staples, information technology, healthcare, financials, energy, consumer discretionary, materials, industrials, and telecommunication services. We primarily review all the stocks in these sectors to gauge their quality as well as their performance. As we look for stocks that are either outperforming the index or have the potential to outperform, the key for us is to pick stocks that we expect to beat the index. Q:  How do you choose between sectors? A : We start out with the macro view and our top-down approach. Based on the combination of economic metrics and factors discussed earlier, we focus on sectors showing the best potential of outperforming the index. At present, we believe that healthcare and technology are the two best opportunities to meet this goal. We think that the market is currently in a trading range and it can bounce up and down quite a bit. Therefore, we will use the healthcare sector to help us if the market drifts down, because the sector is basically composed of many blue chip companies such as Pfizer, Merck and other stable businesses. Conversely, if the market drifts up, we think that technology should do better. For this reason we are invested in stocks like Apple, eBay and other large tech companies. Q:  How do you revise your expectations? A : If the fund is underperforming and it is due to the healthcare area, then we have two factors to consider. First, we assess if the negative performance is due to the individual stocks within the portfolio that may be dragging us down. Second, we want to ensure if the fault lies with the healthcare sector itself. Should we determine that some particular stocks have caused the portfolio to underperform, we will figure out which ones are accountable and we will look for ways to replace them. Q:  How many names do you have in the portfolio at any given time? A : Currently, we have 386 stocks in the portfolio, with the healthcare portion comprising 28 stocks and information technology accounting for 34 stocks. The number of holdings in the portfolio may fluctuate but the 70% weight to the index never changes because it is benchmarked. We may be overweight or underweight in certain industries and segments of the S&P Composite 1500 Index depending on what the managers believe to have the greatest or least potential for capital appreciation in the current market environment. Q:  What is your sell discipline? A : We sell a stock for a number of changes in circumstances. If the top-down approach suggests that an environment is bound to change from its current state, we will re-examine our intentions. For instance, if we thought the market was going to go down, we would be more conservative and buy a sector that we think would be holding better in a decline. Q:  How do you view and manage risk in the portfolio? A : For us, market risk is a major source of risk. We are very concerned about the potential scenario of a significant correction that might consequently go into our strategy. That is, in fact, one of the main reasons why we overweight the healthcare sector. Q:  What is the rationale for allocating exactly 30% of the portfolio to the two best performing sectors? A : It was basically a judgment call. We thought that 20% would probably not be sufficient to influence the overall performance, whereas 40% or 50% allocation could be just too overpowering. We arrived at a compromise between the two extremes, settling for 30%, which was in the middle. It was important for us to strike a balance because we want people to realize that with this portfolio there is not a lot of risk relative to the index. Since there is a lot of volatility within the 10 sectors, we feel that if we can pick two sectors that are going to do really well, the 30% portion still has a decent chance of outperforming the index. Q:  Why do you think that there is growing volatility that filters through sectors and markets? A : We are living in an era when investors are trying to beat the market as opposed to about 15 years ago when investors were not so aggressive. However, with all the latest technology and today’s speed of trading and dissemination of information, there are many more investors, both small and large, who have short investment horizons. That certainly creates an incredible amount of volatility. The streaming of information is so quick and people react so swiftly that as soon as circumstances change, everybody charges out again at the same time creating another layer of volatility on the downside. It is a herd mentality armed with the latest technology that only puts markets turbulence at new peaks.