The exchange traded fund business is seeing activity rise due in part to the growth of tactical investing as more individuals move away from buy-and-hold strategies, according to a recent report.
With market volatility and correlations rising, investors have been seeking out alternative ETFs to freely move around the markets and reduce risk, taking away business from what once was exclusively the domain of actively managed funds, according to a Strategic Insight report.
Strategic Insight reveals that less investors and advisors are loath to stick with the “buy-and-hold” mantra as more are adding tactical strategies that require greater attention and more frequent rebalancing, reports Chriss Flood for Financial Times.
“Many investors use ETFs in ‘tactical’ ways. Either to express short-term views on segments of the market, or for tax-loss harvesting, transition management or cash equitization purposes,” Loren Fox, a senior research analyst at Strategic Insight, said in the FT article.
Additionally, the firm pointed out that ETFs are increasingly being used as low-cost beta, or volatility, solutions in core and satellite holdings. Investors are also seeking to generate greater alpha, or excess returns, through a mixture of beta exposure through long-short, sector-rotation and other ETF strategies.