The ProShares RAFI Long/Short ETF (NYSEArca: RALS) is based on strategies developed by the “father of fundamental indexing,” Rob Arnott, and identifies opportunities that are implemented through both long and short securities positions.
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. [Diversify with Liquid Alternative ETFs]
Looking ahead, as the markets return to normal, investors should expect lower returns than what they have been accustomed to. Consequently, liquid alts could potentially enhance returns.
Even if a crash doesn’t occur, “you simply can’t expect the stock market … to continue to throw off the same kinds of returns,” Rice added. “You want to reduce risk, but you will also need to find additional sources of returns.”
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.