Exchange traded funds continue to gather assets despite a difficult market environment that has sent some high-profile hedge fund managers reeling.
Some investors fed up with high-fee funds are moving into ETFs, while others like their transparency and real-time disclosure of portfolio holdings.
Goldman Sachs (NYSE: GS) is closing its largest hedge fund by the end of October after lackluster performance.
Goldman Sachs’ Global Alpha fund, which once held $12 billion in assets but now manages around $1.6 billion, was a well-known hedge fund that utilized quantitative trading strategies, report Lauren Tara LaCapra and Svea Herbst-Bayliss for Reuters. The hedge fund plummeted 13% earlier this month.
The heavy loses in Goldman Sachs’ flagship quantitative strategy has raised questions about the performance of other hedge funds the company manages that implement the strategy.
Andrew Schneider, president and CEO of Global Hedge Fund Advisors, pointed out that some large hedge funds took a severe beating as a result of the volatile market movements during the first half of September and after the sell-off in equities and the wild fluctuations in the currency markets in August.
“The volatility has been so high; if you’re wrong, especially if you’re using margin or leverage, your returns are going to be extremely poor,” Schneider remarked.
ETF fund providers also offer products based on so-called fundamental indices that utilize quantitative and qualitative methodologies in an attempt to outperform other benchmarks. Invesco PowerShares is one of the more prolific providers of fundamentally weighted ETFs.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.