Josh Brown Launches Momentum SMA, Eyes Alpha Beyond Index Funds
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
separately-managed-accountjosh-brown
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Ritholtz Wealth Management CEO Josh Brown unveiled a new separately managed account strategy on 30 May 2026, targeting investors seeking returns that outpace traditional index funds. The SMA, named Delmonico, aims to build concentrated positions in what Brown identifies as the market's premier momentum opportunities. This launch signals a strategic pivot for a firm known for its endorsement of low-cost indexing, reflecting a calculated response to shifting investor demand for tactical alpha generation.
The launch occurs as the dominance of passive investing faces renewed scrutiny. The collective assets under management for U.S. index-based equity mutual funds and ETFs surpassed $12 trillion in Q1 2026, according to Morningstar data. Despite this scale, the performance gap between the S&P 500 and the average active manager has narrowed significantly in the first half of 2026, with the index returning 8.2% year-to-date versus 7.9% for the average large-cap core fund. Persistent market concentration, where the top ten S&P 500 stocks account for over 33% of the index's weight, has created an environment where stock selection outside the mega-caps may offer substantial rewards. Brown's move capitalizes on a growing sentiment that broad market exposure may no longer be sufficient for investors targeting specific return objectives.
The Delmonico SMA enters a competitive landscape for active strategies. Assets in U.S. SMAs totaled approximately $2.5 trillion at the end of 2025, with equity strategies comprising the largest segment. The strategy will typically hold 15-25 stocks, a sharp contrast to the hundreds or thousands of holdings in a typical index fund. This concentration increases both potential upside and volatility; a backtested version of the momentum strategy reportedly achieved an annualized return of 14.5% over the past five years, versus 12.1% for the S&P 500. The strategy’s performance, however, would have experienced a maximum drawdown of 28% during the 2022 bear market, compared to the index's 25% decline.
| Metric | Delmonico SMA (Backtested) | S&P 500 Index |
|---|---|---|
| 5-Yr Annualized Return | 14.5% | 12.1% |
| Max Drawdown (2022) | -28% | -25% |
| Typical Holdings | 15-25 | 500+ |
Management fees for such concentrated SMAs typically range from 0.75% to 1.50% on assets, adding a performance hurdle that index funds do not carry.
Strategies like Delmonico are likely to increase trading volume and volatility in mid-cap and growth-oriented stocks that exhibit strong momentum characteristics. Sectors such as technology, consumer discretionary, and communications services, which are rich with high-momentum names, could see amplified inflows from similar products. A key risk for the strategy is momentum reversal, a phenomenon that can occur rapidly during market shifts, potentially leading to significant underperformance versus the broader market. The success of this SMA hinges on Brown's team's ability to rigorously time entry and exit points, a discipline that has historically proven challenging to maintain consistently. Flow data from prime brokers indicates increased institutional interest in momentum factor ETFs, suggesting Brown is not alone in targeting this style.
Investor adoption rates for the Delmonico SMA in Q3 2026 will be a critical gauge of demand for high-conviction active strategies. The next Federal Open Market Committee meeting on 24 June 2026 will test the strategy's resilience, as interest rate decisions can trigger sudden factor rotations away from momentum. Key technical levels to monitor include the relative strength of the iShares Edge MSCI USA Momentum Factor ETF (MTUM) against the SPDR S&P 500 ETF Trust (SPY). A breakout above its 200-day moving average for MTUM/SPY would confirm institutional support for the momentum factor. Earnings reports from major technology firms in late July will also serve as a catalyst, potentially validating or negating the momentum trade's fundamental underpinnings.
A separately managed account is an individual portfolio of stocks, bonds, or other assets managed professionally by an investment firm. Unlike a mutual fund or ETF, an SMA offers direct ownership of the underlying securities, providing transparency and potential tax advantages through direct tax-loss harvesting. SMAs allow for customization but typically require higher minimum investments, often starting at $100,000, and carry management fees that are additional to any underlying fund expenses.
Momentum investing selects securities based on recent price performance trends, buying assets that are rising and selling those that are falling. Value investing, by contrast, seeks stocks trading for less than their intrinsic value, often identified by low price-to-earnings or price-to-book ratios. Momentum strategies tend to perform well during sustained market trends but are vulnerable to sharp reversals, while value strategies may underperform during bull markets but offer better downside protection.
Josh Brown is the CEO and a principal of Ritholtz Wealth Management, a New York-based registered investment adviser managing over $1.5 billion in client assets. Brown is a financial commentator and author known for his blog, The Reformed Broker, and frequent appearances on CNBC. His firm has historically advocated for passive index fund investing for most clients, making the launch of an active, concentrated SMA a notable evolution in its offering to high-net-worth individuals.
Brown's SMA launch is a high-conviction bet that active momentum strategies can outperform in a market dominated by passive giants.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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