Defender ETF Does Only Half the Job

Late last year I wrote about the Claymore/Sabrient Defender ETF(DEF) and was generally positive on it. Half a year later, results are solidly mixed. This is still a great core holding for broad exposure, but as a defense play, it has yet to prove itself.

The basic idea behind this fund is that it should do well when the market goes down.

The exact methodology is proprietary, but every quarter it rebalances to take into account what did well on bad days around the time of the rebalancing.

That seems more sophisticated than loading up on high-yielding food stocks, which was what I thought the fund would do when I first heard about it.

I also couldn't believe how spectacular this fund's backtest was. Obviously, any fund that could be thought of as niche-y or gimmicky will have a great backtest -- they wouldn't bring it public if it didn't look good in backtests -- but as you can see, DEF's looks very solid.

In that column, as I often do, I suggested that anyone interested in using broad-based products in their portfolio might want to keep tabs on this fund to see how it does for a while. Six months later may not be a very long time, but the fund has done very well since hitting the market, outperforming the S&P 500 by a substantial 3.1%.

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