XUSM's Frequently Asked Questions
Overview
This FAQ answers the 27 questions financial advisors most often ask about XUSM, the MarketDesk Focused U.S. Momentum ETF. Topics are organized into six sections — investment strategy, holdings construction, risk management, fees and taxes, trading and liquidity, and portfolio fit — so you can jump directly to the questions most relevant to your due diligence.
XUSM FAQ Sections
FMTM FAQs by Topic
1. FMTM’s Investment Strategy and How It Works
Q4. Does XUSM invest in both developed and emerging markets?
Q6. What is XUSM's lookback window, and why 6 months instead of 12 months?
Q7. What does "trend consistency and quality" mean in plain English?
2. Holdings, Construction, and Rebalancing
3. Risk Management and Drawdowns
4. Fees, Tax Treatment, and Distributions
5. Trading, Liquidity, and Operations
6. Portfolio Fit and Allocation
Note from Our Founders
The MarketDesk investment philosophy is grounded in two core beliefs. First, we believe in systematic, rules-based strategies that remove emotion from investment decisions and apply a consistent framework across all types of market environments. Second, we believe that long-term outperformance requires focused portfolios with high active share.
Investing is often a hard and humbling endeavor. We approach markets through a rules-based, probabilistic lens that is grounded in research. Our focus isn’t on being right all the time, but on being consistent over time. There will inevitably be periods when the models are out of sync with prevailing market trends. Sometimes the quantitative algorithm will be early, and at other times it will be wrong. That’s not a flaw but a natural part of any systematic approach that seeks to do something different. By applying a repeatable and disciplined framework, we believe the mathematical advantages embedded in each strategy will work in their favor over a full market cycle.
Thank you for the trust you place in us and the opportunity to steward your capital through a wide range of market environments. If you would like to learn more about the strategies or discuss how they may fit within a broader portfolio, we invite you to reach out to our team.
XUSM – MarketDesk International Momentum ETF
XUSM is a quantitative international momentum strategy designed to balance offense and defense. The strategy's data-driven methodology uses price data from the last six months and advanced mathematics to identify companies with the highest relative momentum, even during market drawdowns. XUSM's repeatable framework aims to provide equal-weight exposure to 50-100 companies across developed and emerging markets with stable and consistent momentum.
Section 1: XUSM’s Investment Strategy and How It Works
Q1. What does the XUSM ETF do?
XUSM is the MarketDesk International Momentum ETF, a quantitative strategy that seeks to provide focused exposure to international companies exhibiting the most consistent upward price trends. Each month, the strategy ranks the investable universe on a momentum signal that emphasizes the quality and stability of a stock's recent price trend, then builds an equal-weighted portfolio of 50 to 100 names with the strongest momentum scores. Names showing weakening trends are removed at the next rebalance to capture profits and limit further losses.
XUSM is built on decades of academic research documenting momentum as one of the more durable drivers of long-term equity returns. The strategy's premise: share price data efficiently aggregates all available information about a company across millions of daily trades into a single forward-looking datapoint that is continuously updated as new information becomes available.
Q2. Is momentum factor investing just performance chasing?
It's a fair question, and the short answer is no, but the distinction matters. Performance chasing is what individual investors do when they buy whatever part of the market happens to have done well recently, then sell when it trades lower or disappoints. It's emotional, unsystematic, and tends to produce the wrong entry and exit points.
A momentum factor strategy works differently. It applies a consistent, rules-based framework to identify which areas of the market are leading, then reallocates systematically as leadership changes. The discipline is what separates it from performance chasing. An investor chasing returns will typically buy after a long run and sell after a sharp drop. A rules-based momentum strategy is built to do neither. It adds names showing stable, persistent strength and removes them when the signal weakens, independent of how an investor feels about the position. XUSM uses a data-driven framework to make buying and selling decisions, not human emotion.
Q3. Is XUSM passive or actively managed?
XUSM is actively managed. The strategy's data-driven methodology uses price data from the last six months and advanced mathematics to identify companies with the highest relative momentum, even during market drawdowns. The strategy is rules-based and quantitative, but it doesn't track a published third-party index. That distinction matters in practice. Active management allows the strategy to rebalance monthly and apply a six-month lookback window, with an investment team behind it monitoring the strategy to ensure it's doing what it's designed to do.
Q4. Does XUSM invest in both developed and emerging markets?
Yes. XUSM's investable universe includes both developed and emerging markets outside the United States, and the strategy does not have fixed regional weights between the two. Each month, the momentum signal ranks the full non-U.S. universe on the same criteria. The regional mix of the portfolio is the result of where the strongest, most consistent trends are found.
XUSM aims to fix the structural gap in the existing international momentum lineup. Every established international momentum ETF divides the ACWI ex-U.S. universe in half. IMTM, IDMO, and PIZ hold developed markets only. EEMO and PIE hold emerging markets only. An investor building a full international momentum allocation from those products has to select two funds and then decide the developed and emerging split themselves, which is a top-down macro judgment layered on top of the momentum decision, and one that is typically revisited far less often than the underlying momentum signals refresh.
XUSM applies one momentum process across the entire non-U.S. universe instead. If emerging market leadership strengthens, more emerging market names qualify for the portfolio. If it weakens, fewer do. The allocation is an output of the signal rather than an input, which means the portfolio's regional and country composition can look materially different from one period to the next as leadership rotates.
Q5. What is the XUSM investment universe?
XUSM's investable universe includes international large- and mid-cap companies across both developed and emerging markets, broader than developed markets alone. The wider scope is intentional. Momentum trends can emerge in mid-caps before those companies grow into large-caps, and a strategy limited to developed markets can't access opportunities found in emerging markets.
Liquidity is also a defining feature of the universe. To ensure XUSM's investment strategy can scale as the fund's assets under management (AUM) grow, XUSM requires each portfolio holding to trade a minimum of $15 million USD in average daily volume. Across a minimum of 50 holdings, that floor translates to $750 million in aggregate daily liquidity underlying the portfolio (i.e., 50 x $15 million). The requirement is designed to ensure the strategy can scale as assets grow without sacrificing the ability to move in and out of positions efficiently. For comparison context, the industry standard for fund prospectuses is often an average daily trading volume of only ~$500k per holding (roughly 30x lower than XUSM’s requirement).
Q6. What is XUSM's lookback window, and why 6 months instead of 12 months?
XUSM evaluates momentum over a six-month lookback window. Most traditional momentum strategies use a 12-month lookback. The trade-off is responsiveness: a 12-month window can smooth short-term noise, but it can also lag real-time market leadership changes by a wide margin. A 6-month window weighs recent price behavior more heavily, allowing the portfolio to rotate sooner when market leadership shifts. The shorter lookback window is one of the structural reasons XUSM's portfolio and performance can look meaningfully different from 12-month momentum strategies throughout a full year.
Q7. What does "trend consistency and quality" mean in plain English?
XUSM's signal is built on the principle that price data is the most efficient available aggregator of investor sentiment, fundamentals, and forward-looking expectations. Most momentum strategies rank stocks by total return over a twelve-month window. The higher the return, the higher the rank. XUSM goes a step further by evaluating how that return was earned, not just how large it was.
Consider two stocks that both gained +30% over six months. The first climbed steadily, posting gains throughout most of the period. The second was flat for five months, then traded up sharply in a single week. Both have the same return. They don't have the same trend. XUSM's signal scores the first stock more favorably because a steady, persistent trend is more likely to continue than a single sharp move that may already have run its course. Filtering for trend quality is designed to reduce exposure to short-term spikes that could reverse quickly.
Q8. What is XUSM's sell discipline?
Exit discipline (deciding when to remove a holding from a portfolio) is as important to a momentum strategy as entry selection. XUSM applies the same systematic framework on the way out as on the way in. When a holding's momentum signal weakens below the threshold required to remain in the portfolio, the position is removed at the next monthly rebalance, regardless of how the underlying company is performing on other dimensions. The model is designed to cut losers before they become significant detractors, rather than wait for confirmation that a downtrend has fully developed. That same discipline works in both directions. The strategy systematically rotates into names with strengthening momentum and out of names showing early signs of deterioration. The discipline of the dual signal is intended to compound over time.
Q9. Is XUSM currency hedged?
No. XUSM give investors unhedged exposure to foreign currencies, meaning returns reflect both local equity performance and the movement of those currencies against the dollar. Because XUSM's momentum signal is measured in U.S. dollar terms, currency trends are already reflected in the score. A market whose equities are flat in local terms but whose currency is appreciating against the dollar will screen as having positive momentum, which aligns the signal with the return a U.S.-based investor actually realizes.
Section 2: Holdings, Construction, and Rebalancing
Q10. How many stocks does XUSM hold?
XUSM typically holds 50 to 100 stocks. The portfolio is concentrated by design, so each position has a meaningful impact on portfolio results. Many broader momentum funds hold 200 or more companies, which can dilute the factor exposure and construct a portfolio that looks and performs only slightly different than a broad-market index. XUSM's focused portfolio is built to deliver purer and more concentrated exposure to the momentum signal.
Q11. How is the portfolio weighted? Why Does XUSM use Equal-Weighting?
XUSM uses equal weighting. Every position receives roughly the same allocation at each monthly rebalance, regardless of the underlying company's market capitalization.
XUSM's equal-weight methodology is designed to achieve two primary objectives. First, it reduces company-specific risk. In a concentrated portfolio of 50 to 100 stocks, a single oversized position can have an outsized effect on performance. Equal weighting prevents that by spreading capital evenly across holdings.
Second, it keeps the portfolio aligned with the momentum signal. A market-cap-weighted approach would tilt the portfolio toward larger companies regardless of their momentum characteristics, and over time a few mega-cap names would come to dominate returns (for better or worse). Equal weighting ensures each stock is in the portfolio because of the strength of its momentum score, not its size. The result is a portfolio with less overlap to broad-market indexes and more direct exposure to the intended momentum signal.
Q12. How often does XUSM rebalance?
XUSM rebalances monthly. The monthly cadence is one of the strategy's most important structural features. Most index-based momentum ETFs rebalance only twice per year. In fast-moving markets, leadership can shift well before the next scheduled rebalance, potentially leaving those funds holding names that have already lost momentum. A monthly cadence keeps the portfolio responsive to current market conditions, allowing the strategy to rotate away from weakening trends sooner and into emerging strength faster.
Q13. How is XUSM different from other momentum ETFs?
XUSM differs from larger momentum ETFs across four dimensions: signal definition, lookback window, rebalance frequency, and portfolio construction. (1) Signal: XUSM evaluates the consistency and quality of a stock's recent trend, not just how much it has gained. Most momentum funds rank stocks on raw twelve-month total return. (2) Lookback: XUSM uses a shorter six-month window, which is designed to capture more current trends. The traditional academic standard, used by legacy momentum funds, is twelve months excluding the most recent month. (3) Rebalance: XUSM rebalances monthly while most legacy international ETFs rebalance twice a year or quarterly. (4) Construction: XUSM holds 50 to 100 equal-weight positions across international large- and mid-caps in both developed and emerging markets. Most peers hold 200 or more positions, often weighted by a blend of market cap and momentum score, and many are limited to developed-market only universes.
For a deeper side-by-side comparison, the XUSM vs. ACWX blog post walks through that comparison in detail.
Q14. How much portfolio overlap is there with other international momentum ETFs?
Less than most investors expect. Legacy international momentum ETFs like IMTM and IDMO both draw exclusively from developed markets and weight by a blend of market capitalization and momentum score, which means their largest positions tend to cluster in the same mega-cap names regardless of which fund you pick. XUSM works differently on three dimensions that all reduce overlap: (1) a broader investable universe that includes emerging markets and mid-caps; (2) equal weighting that prevents mega-cap dominance; and (3) a 6-month lookback with a monthly rebalance that can respond to leadership changes faster than a 12-month signal rebalanced semi-annually. The practical result is that XUSM's holdings often differ meaningfully from developed-market-only momentum ETFs at any given point in time. The low overlap is also why XUSM can sit alongside another momentum ETF in a portfolio without being redundant.
Section 3: Risk Management and Drawdowns
Q15. Why does portfolio drawdown matter as much as total return?
Many investors focus primarily on returns, but drawdown, how much a portfolio declines before recovering, can be just as important. The deeper the decline, the harder it is to get back to even: a −15% loss requires a +17.6% gain to recover, while a −50% loss requires a +100% gain. Smaller drawdowns reduce recovery time and make it easier for investors to stay disciplined during periods of volatility. For a momentum strategy specifically, controlling downside matters because the next leadership cycle often begins before the broader market has fully recovered. A portfolio that is closer to its prior high is better positioned to participate in that next leg.
Q16. How is XUSM designed to respond during periods of market stress?
XUSM's framework is designed to respond to changing market conditions in two ways. First, the 6-month lookback weights recent price behavior more heavily than a 12-month window, which means deteriorating trends register in the model sooner. Second, the monthly rebalance allows the portfolio to act on those signal changes within weeks rather than waiting for the next semi-annual reconstitution. During periods of elevated market stress, the framework is designed to go further by emphasizing shorter-term price data, which makes the momentum signal even more responsive to recent leadership changes. As trends shift and previous leaders come under pressure, the strategy is designed to rotate toward areas of emerging relative strength rather than remain anchored to stale momentum signals.
Q17. What environments are typically harder for momentum strategies?
Momentum strategies generally face their biggest challenges in three environments. The first is sharp, fast reversals or whipsaw markets where leadership flips abruptly and a strategy positioned in recent winners is left holding the wrong names just as the new leaders emerge. The second is range-bound or trendless markets where there is no clear leadership for a momentum framework to identify. The third is narrow rallies dominated by a small handful of mega-cap stocks, where an equal-weighted strategy will lag because it does not concentrate in those names. Every momentum implementation, including XUSM, has periods of relative underperformance. These periods are a normal part of factor-based investing, not a sign the framework is broken.
What separates one momentum strategy from another is how quickly it adapts when conditions change. XUSM's monthly rebalance, 6-month lookback, and risk-driven signal adjustment are designed to respond faster, rotate sooner, and spend less time positioned in yesterday's leadership.
Q18. Does XUSM hedge or move to cash during periods of market stress?
Risk management is primarily implemented through holding selection rather than asset allocation shifts. During periods of elevated stress, the framework emphasizes shorter-term price data to identify which equities are demonstrating relative strength under current conditions. For example, during a market selloff, leadership often shifts toward lower-beta stocks (i.e., beta measures how much a stock's price moves compared to the whole market) and more defensive sectors, which is the type of relative strength the model is designed to identify and rotate toward. The portfolio still consists of 50 to 100 equal-weighted international large- and mid-cap stocks, but it rotates among those names more responsively when leadership is changing quickly. As a result, it would be reasonable to expect the portfolio's holdings and sector exposures to look materially different during a bear market than during a bull market.
Section 4: Fees, Tax Treatment, and Distributions
Q19. What is XUSM's expense ratio?
XUSM's expense ratio is 0.75%. The fee covers active quantitative management, monthly rebalancing, and the operational costs of running an actively managed ETF. The expense ratio is higher than passive index momentum ETFs like and below many specialty active ETFs. Whether that tradeoff makes sense depends on the role momentum plays in the investor's portfolio. If minimizing costs is the priority, a passive index ETF is the right choice. If the goal is a differentiated approach with a faster rebalance, a different momentum signal, and a broader universe, that's what XUSM is designed to provide.
Q20. Does monthly rebalancing make XUSM tax-inefficient? Has XUSM made any capital gains distributions?
Although XUSM actively rebalances its portfolio, ETFs have a structural feature that helps minimize capital gains distributions: the in-kind creation and redemption process. This mechanism is available to all US-listed ETFs and allows the portfolio to manage turnover without realizing capital gains at the fund level. As a result, even strategies with high turnover can remain tax-efficient within the ETF wrapper. To date, XUSM has not made any capital gains distributions. No ETF can guarantee that capital gains will never occur, but the ETF structure is specifically designed to reduce the likelihood that capital gains will ever be paid out.
A common follow-up question is how this compares to buying and holding a passive index ETF like ACWX. Any actively rebalanced strategy will generate more portfolio activity than a true buy-and-hold position. What the ETF structure does is separate the internal activity from the tax bill the shareholder receives. When XUSM rotates a name out of the portfolio, the in-kind redemption process allows the appreciated security to leave the fund without the fund itself realizing a capital gain. ACWX relies on the same mechanism to maintain its tax efficiency despite its own turnover from index reconstitutions. The difference is that XUSM uses it more frequently, and there is no limit on how often it can be used.
Q21. Does XUSM pay a dividend?
XUSM holds international equities, some of which pay dividends. Distributions from XUSM, if any, generally reflect the dividend income received from the underlying holdings. Because the portfolio rotates monthly, the underlying dividend yield can vary from period to period.
Section 5: Trading, Liquidity, and Operations
Q22. Where does XUSM trade and how do I buy it?
XUSM trades on Nasdaq under the ticker XUSM. It can be purchased like any other ETF through a standard brokerage account and is available on most major brokerage platforms. Investors who don't see it listed should check with their brokerage. For the best execution, limit orders during normal market hours are generally recommended for any ETF, including XUSM.
Q23. XUSM is smaller than other momentum ETFs. Does that mean wider bid-ask spreads?
Not necessarily. ETF liquidity is driven primarily by the liquidity of the underlying holdings, not the size of the fund itself. XUSM requires each portfolio holding to trade at least $15 million USD in average daily volume, meaning the underlying securities are highly liquid even when the ETF's secondary market volume is light. Authorized participants can create and redeem XUSM shares against the underlying basket, which keeps the ETF's price tightly linked to its net asset value. That said, investors should always use limit orders rather than market orders and avoid trading in the first and last few minutes of the session, when spreads on all ETFs are wide.
Q24. Will XUSM's growth impair the strategy?
Growth in AUM is generally not expected to impair the implementation of the strategy. The investable universe already includes a unique requirement that every portfolio holding must trade more than $15 million USD in average daily volume over the trailing three months, and the portfolio holdings often trade well above that threshold. At the strategy's minimum liquidity requirement, 50 holdings at $15 million each implies $750 million in total daily trading volume across the portfolio. In practice, the liquidity can be much higher. The strategy's emphasis on trading volume is intentional and is designed to ensure that holdings remain highly liquid even as the fund grows.
Two additional structural features support capacity. The strategy can increase trading frequency as needed, and the prospectus permits the portfolio to expand from 50 holdings up to 100 positions, all maintained at equal weight. The 100-position ceiling and equal-weight methodology exist specifically to ensure XUSM retains its differentiated factor exposure rather than drifting toward large-cap beta as assets grow. Like all investment strategies, there are practical limits to capacity over time, and these are continuously monitored as part of the portfolio management process.
Section 6: Portfolio Fit and Allocation
Q25. How does XUSM fit alongside an international or total-market core?
XUSM is not designed to replace a broad-market core holding. It is designed to complement one. Because XUSM holds 50 to 100 equal-weighted positions drawn from a universe broader than developed markets alone, its portfolio only partially overlaps with a fund like ACWX or IXUS at any given time. XUSM's equal-weighting methodology means even shared names are sized very differently. The two can work together: a broad-market core provides diversified market exposure and serves as the strategic anchor of the portfolio, while a momentum sleeve adds factor exposure intended to behave differently than the core during periods of leadership change.
Q26. Should XUSM be held in a taxable or tax-advantaged account?
XUSM can be held in either. The ETF structure's in-kind creation and redemption process is designed to minimize capital gain distributions despite the strategy's monthly turnover, and XUSM has not made any capital gains distributions to date. As a result, the strategy does not carry the same tax-location concerns that a high-turnover mutual fund equivalent would. This information is for general educational purposes only and should not be considered tax advice. Investors should consult their tax advisor regarding their specific situation.
Q27. What sizing typically makes sense for a momentum sleeve?
There is no universally correct allocation, and the right size for any momentum sleeve depends on the investor's overall portfolio structure, risk tolerance, and time horizon. As a general framework, international factor-based equity sleeves are commonly sized between 5% and 15% of the equity allocation. A smaller sleeve provides modest factor exposure with limited tracking error against the broad market. A larger sleeve provides stronger factor exposure but with more visible periods of divergence from the core. This is not investment advice. Investors should consult a qualified advisor before making allocation decisions.
Definitions
MSCI ACWI ex USA Index – MSCI ACWI ex USA Index represented by the iShares MSCI ACWI ex U.S. ETF (ACWX). The MSCI ACWI ex USA Index is a free float-adjusted, market-capitalization-weighted index designed to measure the combined equity market performance of developed and emerging markets countries, excluding the United States, covering approximately 85% of the global equity opportunity set outside the U.S. Indexes are unmanaged and not available for direct investment. References to third-party funds are for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy, or investment product.
Developed Markets / Emerging Markets – Country classifications assigned by index providers based on criteria including economic development, market size, liquidity, and market accessibility. Classifications differ across index providers and change over time.
Max Drawdown – The largest decline in the value of an investment from its highest point to its lowest point before a new high is reached. It measures the peak-to-trough loss experienced during a specific period and is commonly used to understand the potential downside risk of a strategy or investment.
Max Drawdown Length – Maximum drawdown length is the amount of time it takes for an investment to recover from its largest peak-to-trough decline and return to its previous high. It measures the duration of the recovery period following the maximum drawdown. For example, if an investment reaches a high, declines significantly, and takes 18 months to regain that prior high, the maximum drawdown length would be 18 months.
Bid/Ask Spreads – Bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security, reflecting market liquidity and transaction costs.
Currency Hedging – The use of financial instruments to reduce or eliminate the effect of foreign exchange rate movements on returns. An unhedged fund passes currency movements through to investors.
Footnotes
Source: MarketDesk Indices. Data as of 9/15/2026. Trading volume figures are based on publicly available market data and are subject to change. Past liquidity characteristics are not indicative of future market liquidity. Holdings are subject to change and should not be considered investment advice.
ETFAC-5800420-08/26
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