The growing spectrum of alternative exchange traded fund investment strategies present a significant opportunity for advisors who are looking to diversify client portfolios.
As the U.S. heads toward the ninth year of the equity bull run, market experts will review the stock market risks and liquid alternative strategies that could better manage the market environment ahead on the the annual online ETF Trends Virtual Summit on February 8.
Salvatore Bruno, Chief Investment Officer and Managing Director of IndexIQ, Sylvia Jablonski, Capital Markets-Institutional Strategist and Managing Director at Direxion, and George Milling–Stanley, Head of Gold Investment Strategy at State Street Global Advisors, will discuss options available to advisors for reducing portfolio risk, whether your objective is long-term diversification or short-term tactical positioning.
“In the current market environment, with equities near all-time highs and interest rates still below historical averages, we believe alternative investments maybe a solution for investors struggling with how to make money while still managing risk,” Gary Stringer, Kim Escue and Chad Keller of Stringer Asset Management said in a note. “We think of alternative investments as a basket of securities that, when combined together, can offer greater return potential than traditional bonds, lower volatility than equities, and a lower correlation to both.”
For instance, the IQ Hedge Multi-Strategy ETF (NYSEArca: QAI) provides a multi-strategy approach to a number of hedge fund strategies to help smooth out potential swings. Specifically, QAI provides a diversified mix of alternative strategies, including multiple hedge fund investment styles, such as long/short equity, global macro, market neutral, event-driven, fixed income arbitrage and emerging markets.
Another idea is to use an inverse ETF to hedge market risks – inverse ETFs aim to reflect the opposite of the daily percentage movement of an index. For example, the Direxion Daily 20-Year Treasury Bear 3X (NYSEArca: TMV) or Direxion Daily 20+ Year Treasury Bear 1x Shares (NYSEArca: TYBS) can be used to hedge a fixed-income portfolio in a rising rate environment as the two inverse Treasury bond ETFs capitalize on falling bond prices or rising yields.
“Regardless of the equity rally, we’ve seen the start of interest-rate hikes which are believed to continue through 2017,” Jablonski said in a note. “This creates opportunities for investors looking to express bearish views on the 20+ Treasury index.”
Gold has also been a safe-haven play in an increasingly volatile world. However, gold has exhibited an inverse relationship with the U.S. dollar, weakening as the greenback strengthens, which recently occurred after the USD appreciated on the Federal Reserve’s monetary tightening policy. Nevertheless, global risks abound and investors may still turn to safe-haven assets.
Consequently, State Street Global Advisors and the World Gold Council have partnered up yet again to craft the SPDR Long Dollar Gold Trust (NYSEArca: GLDW). The new launch will help gold investors in an environment where the U.S. dollar is expected to appreciate.
“GLDW is basically an investment in gold for a strong dollar environment,” Milling-Stanley told ETF Trends. “The likelihood of a strengthening dollar during 2017 has deterred some investors from buying GLD, so GLDW gives investors the opportunity to gain exposure to movements in the price of gold in a basket of foreign currencies.”
Financial advisors who are interested in learning more about CFP/CIMA accredited panels on the online conference can register for the February 8, 2017 ETF Trends Virtual Summit.