We highlighted an actively managed ETF that has been rising to prominence since inception in January of last year back in March of 2012, AdvisorShares Active Bear ETF (NYSEArca: HDGE). The fund is not tied to a specific index, but rather is actively managed in selecting equity names to take short positions on, speculating that these individual share prices will fall.
Currently, the fund managers have their heaviest short weightings to COH (-3.74%), RBA (-3.42%), DB (-3.31%), TIF (-3.22%), and MRVL (-3.07%).
Ranger Alternative Management LP, the portfolio managers behind HDGE are fundamentally, bottom-up research driven, and attempt to identify shorting opportunities among companies that they believe may have poor earnings quality or aggressive accounting practices. [Short Bets Pay Off for Actively Managed Bear ETF]
Additionally, events such as upcoming earnings releases or guidance related to earnings are examined on a company by company basis as the portfolio managers investigate potential “shorting” opportunities.
While not specifically an “inverse” fund as the ETF is again actively managed but with a short mandate, the fund has typically thrived in times of market distress when broader equity prices are falling and on the flipside, performance has fallen off as one might expect during market cycles where generally security prices are rising.
YTD, HDGE is down 16.51% versus the S&P 500 Index up 15.41% during the same time frame. However, with less than one year of a live track record, it is likely too early to make any snap judgments in regards to live performance.
HDGE has been rather successful in attracting assets,(>$325 million currently) and the fund trades more than 570,000 shares on an average daily basis, so it is clearly on the radars of those that are looking to incorporate “actively managed” ETF strategies.
Moreover, “short” oriented ETF strategies likely are gaining appeal with advisors whom do not want to deal with daily compounding/leveraging and associated re-balancing that comes with the territory, and in the case of HDGE, no leverage nor daily compounding is part of the picture because again the fund is not tied to a specific benchmark index but rather actively managed on a stock by stock basis.
AdvisorShares Active Bear ETF
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Story updated to correct launch date of HDGE.