ETF Trends Editor Tom Lydon speaks with ProShares’ Head of Investment Strategy, Joanne Hill, about alternative investments and why she thinks a hedge fund ETF is attractive in this market.
The ProShares executive says alternative investments make sense for investors who are sensitive to risk-adjusted returns or those who want absolute return strategies without a benchmark. Alternative strategies can also be used to manage risk and volatility, and provide diversification beyond the “traditional toolkit,” she explains.
Hill also discussed the merits of ProShares Hedge Replication ETF (NYSEArca: HDG).
“Believe it or not you can take a broad index of hedge fund performance … and you can come pretty close to the returns of that broad index,” she tells Lydon. The ProShares ETF is rebalanced every month to reflect changes in the hedge fund industry.
“You might think it’s the passive version of hedge funds,” but turnover can range as high as 20% a month, Hill says.
She acknowledges that hedge funds have been struggling all year with some managers caught off-balance by the stock rally.
However, Hill thinks HDG is a “good opportunity to buy in to the hedge fund community with this vehicle … because in the future they’re going to figure out how to deliver those returns they’ve historically been so good at.” The market has been driven by mega- cap stocks recently “but that’s not going to last forever,” she adds.
Watch the video to see the full interview.