Generally as equity markets have weakened in spurts as we have seen in recent sessions, we notice an uptick in activity in an actively managed ETF that is predicated on short-selling individual equity names, HDGE (AdvisorShares Active Bear ETF, Expense Ratio 1.85%).
The fund is not an inverse linked product nor does it incorporate leverage, but the sub-advisor Ranger Alternative Management attempts to identify companies that have “low earnings quality or aggressive accounting which may be intended on the part of company management to mask operational deterioration and bolster the reported earnings per share over a short time period. In addition, the portfolio management team seeks to identify earnings driven events that may act as a catalyst to the price decline of a security, such as downwards earnings revisions or reduced forward guidance,” according to fund literature.
Currently, HDGE’s management team is most bearish the following names: IBM -6.62%, CAT -5.18%, TCK -3.99%, TEX -3.05%, and MON -3.02%.
Even with the fund trading at its lowest levels since inception in November of 2011, it has still attracted $196 million in overall assets under management, including +$23 million just year to date.
AdvisorShares has not stopped at HDGE in terms of actively managed “short” equity offerings, as it also recently launched HDGI (AdvisorShares Athena international Bear ETF, Expense Ratio 1.50%) which kicked off in mid-July of this year. [International Bear ETF]
AthenaInvest Advisors is the manager of this strategy, utilizing “a behavioral finance approach to identifying securities to short.
Stocks are screened and selected using the portfolio manager’s patented behavioral research. The research measures manager behavior, strategy consistency and conviction, and identifies which stocks are held in top and bottom relative weight positions within the equity universe.
Short positions are selected from the lowest conviction holdings in the international universe and are allocated based on market capitalization.” This fund focuses its efforts outside of U.S. listed securities, and currently has its largest short positions in HBC, TM, VOD, BP, and GSK, which are all well-known large cap names domiciled outside of the U.S.
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