Why ORR's Long/Short Strategy and High Conviction Holdings Make It a Unique Play in a Volatile Market

In an era of market fragmentation and persistent volatility, investors are increasingly seeking strategies that defy traditional benchmarks and deliver asymmetric returns. Enter the Militia Long/Short Equity ETF (ORR), a high-conviction, actively managed vehicle that leverages a global long-short equity approach to capitalize on market inefficiencies. With a unique blend of aggressive stock selection, currency hedging, and concentrated exposure to undervalued assets, ORR is positioned as a compelling alternative for investors seeking low-correlation, high-alpha opportunities.

The Structure of ORR: A High-Turnover, Active Equity Engine

Launched in January 2025, ORR is managed by David Orr, a seasoned investor with a track record in long-short strategies. The fund's structure is designed to thrive in both bullish and bearish environments by simultaneously taking long positions in undervalued equities and short positions in overvalued ones. This dual approach allows ORR to hedge against broad market downturns while amplifying gains in sectors or regions where its convictions are strongest.

The fund's expense ratio of 18.48% is notably higher than the average ETF, but this reflects the costs of short selling—dividend obligations, interest on borrowed securities, and currency hedging. After adjusting for these expenses, the 1.30% management fee aligns with industry norms for active strategies. For investors, this cost structure underscores the fund's focus on generating alpha through active management rather than passive indexing.

Performance: Outperforming in a Challenging Environment

ORR's performance since inception has been nothing short of impressive. As of July 31, 2025, the ETF delivered a 10.69% return in market price terms and 9.72% in net asset value (NAV) terms over the past month. Year-to-date, it has returned 3.91% (market price) and 3.06% (NAV), outperforming many passive benchmarks in a market characterized by divergent sector rotations and macroeconomic uncertainty.

What sets ORR apart is its asymmetric positioning. For example, the fund's long exposure to Japanese equities—such as Hikari Tsushin Inc. and Energy Transfer LP—has benefited from a re-rating of undervalued Asian markets, while its short positions in leveraged ETFs (e.g., ARK Innovation ETF) have capitalized on overvaluation in speculative tech stocks. This duality creates a portfolio that is less correlated to broad indices like the S&P 500 or MSCI World, offering diversification in volatile conditions.

Portfolio Composition: High Conviction, Global Reach

ORR's portfolio is marked by a high concentration of assets in its top 10 holdings, which account for 82.3% of total assets. This concentration reflects the fund's focus on high-conviction ideas rather than broad diversification. Key holdings include:
- Hikari Tsushin Inc.: A Japanese telecom provider with a 10% allocation, reflecting the fund's belief in the long-term growth of Asia's digital infrastructure.
- Energy Transfer LP: A U.S. energy infrastructure play, positioned to benefit from the transition to clean energy.
- Short positions in leveraged ETFs: These bets aim to profit from market corrections in overhyped sectors.

The fund's exposure to foreign equities (89.3%) and energy infrastructure (27.3%) further differentiates it from traditional equity strategies. By focusing on sectors and geographies with structural growth drivers, ORR aims to generate returns that are less tied to U.S. market cycles.

Low Correlation and High Alpha: A Strategic Edge

One of ORR's most compelling attributes is its low correlation to major indices. For instance, the MSCI World Index and its futures have shown a correlation of only 80% over the past year—a figure far below the typical 95%+ threshold. This divergence, driven by time zone discrepancies and currency hedging, creates opportunities for ORR to exploit mispricings in global markets.

Moreover, ORR's active management style allows it to adjust its portfolio rapidly in response to macroeconomic shifts. For example, its short-term hedging of Japanese Yen exposure via forward contracts mitigates currency risk while preserving equity gains. This flexibility is critical in a low-correlation environment where traditional hedging tools may fall short.

Risks and Considerations

While ORR's strategy is compelling, investors must weigh its risks. The fund's high expense ratio and concentration risk could amplify losses during market dislocations. Additionally, its reliance on short selling exposes it to liquidity constraints and margin calls in fast-moving markets.

However, for investors with a medium-term horizon and a tolerance for volatility, ORR offers a unique value proposition. Its ability to generate alpha in both rising and falling markets, combined with its low correlation to traditional assets, makes it an attractive tactical allocation.

Investment Thesis: A Tactical Play for Uncertain Times

In a world where central bank policies and geopolitical tensions continue to disrupt traditional market dynamics, ORR's long-short strategy provides a roadmap for navigating uncertainty. By combining high-conviction stock selection with dynamic hedging, the fund is engineered to deliver uncorrelated returns in a volatile environment.

For investors seeking to enhance their portfolios with a vehicle that prioritizes active management and asymmetric risk-reward, ORR represents a compelling case. As the fund's performance in 2025 demonstrates, its approach is not just theoretical—it's delivering results in real-time.

In conclusion, ORR's blend of global exposure, active equity selection, and low-correlation positioning makes it a standout in the crowded ETF landscape. While it is not without risks, its track record and strategic framework position it as a unique play for investors looking to capitalize on market inefficiencies in a volatile world.