As the exchange traded fund (ETF) industry grows, new and increasingly more esoteric product types are appearing. Do they have a place in your portfolio? A few experts weighed in on the topic during a webcast earlier this month.
David Hoffman and Evan Cooper for Investment News report on how certain industry insiders feel about non-traditional ETFs in portfolios. The excellent and informative full webcast can be viewed in Investment News’s archives.
On leveraged and inverse ETFs in general:
John Carr of Carr Schwartz Butterfield: The leveraged funds are on the radar of FINRA, the SEC and many states, so advisors are required to document the performance of the ETF, and prove how the funds are helping out a client’s portfolio. It is up to the advisor to prove why the ETF is suitable and necessary for their clients.
Kathleen Moriarty of Katten Muchin Rosenman: I would really encourage potential investors to at least read the summary portions of the prospectus, because in all of the leveraged and ETF prospectuses now, they give actual examples, either in the front part of the prospectus or in the back, of how the mechanism works. Half of the problem comes from people not understanding how the investment works.
On these ETFs and whether their performance meets expectations: