Non-traditional, alternative asset-based exchange traded funds can help investors diversify away from traditional stocks and bonds, providing uncorrelated returns that can help generate better risk-adjusted returns.
In the upcoming webcast, Liquid Alternatives: Bridging the Gap for Retail Investors, John G. Feyerer, head of product strategy & research at PowerShares, Jason Stoneberg, director of research at PowerShares, and Ted Samulowitz, portfolio manager for PowerShares, help define alternative strategies and explain how the investment styles can help diversify a portfolio.
Most retail investors are loath to include liquid alternative assets because of a dearth in access and knowledge to the investment strategies. However, with ETFs, investors may find greater transparency and understanding into the investments.
Specifically, alternative strategies help investors diversify away from their traditional equity and fixed-income exposure. For instance, alts assets like commodities help hedge against inflation. Dividend-generating assets such as master limited partnerships and real estate investment trusts help diversify away from traditional dividend and bond holdings. Additionally, alts cover hedge-fund-esque strategies, employing long/short positions and factor-based investments. [Alternative ETF Strategies To Reduce Portfolio Risk]
For instance, the actively managed PowerShares Multi-Strategy Alternative Portfolio (NasdaqGM: LALT) tries to provide positive total return with a low correlation to broad securities and can be used as a fixed-income substitute. LALT holds a combination of equities, along with financial future contracts, forward currency contracts and other securities.
Looking at LALT, the fund includes long and short positions in G-10 currency forwards, stocks and VIX index futures, along with a significant long position in interest rate futures.
The actively managed PowerShares S&P 500 Downside Hedged Portfolio (NYSEArca: PHDG) tries to generate positive total returns in a rising or falling market. PHDG can act as an equity substitute to help provide uncorrelated returns to broad equity markets.
Specifically, the ETF includes a blend of equity positions and CBOE Volatility Index Futures to hedge market risks. Potential investors, though, should be aware that while the fund can help hedge against market turns, PHDG may lag the equities market in bullish conditions.
For more information on active strategies, visit our actively managed ETFs category.
Financial advisors who are interested in learning more about alternative investment strategies can register for the Wednesday, August 13 webcast here.