The multi-year bull market run can’t go on forever as valuations continue to push higher. Consequently, more are thinking about actively managed exchange traded funds as a bet that managers are better equipped in the current market environment.
ETF Trends publisher Tom Lydon spoke with Noah Hamman, Chief Executive Officer of AdvisorShares, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about the growing trend in the actively managed ETF space.
“Alternative strategies are coming into play as well,” Hamman said. “Long/short are starting to, maybe depending on what this year might look like in 2017, find a place in portfolios.”
At AdvisorShares, the ETF provider partners with a variety of managers to provide a number of different actively managed strategies in a cost-efficient ETF investment wrapper.
“We can bring on experts in a particular area or strategy, offer them up in an exchange traded fund, so it is easy for advisors to use them,” Hamman said. “They can allocate to them when they want to. They can not allocate to them when they want to, giving the equivalent of almost building a fantasy football team but using exchange traded funds for your portfolio.”
While money has been leaking out of the traditional open-end active mutual fund side due to high fees and prolonged underperformance, the active ETF space is just starting to fill out.
“Headlines lately say that money is flowing out of active strategies, mostly on the mutual fund side, but the active space is growing, our products have been growing, and more importantly for shareholders performance has been there,” Hamman said. “We have some solid four- and five-star strategies that are starting to find some traction in portfolios.”
For instance, the AdvisorShares Global Echo ETF (NYSEArca: GIVE) may be a popular play for the growing demand for the socially responsible investment theme.
“It’s different. It’s an impact investing strategy – actually bond and equity,” Hamman said. “It’s not a filtering strategy. It’s a proactive strategy in companies and debt that are trying to make a positive impact, and we’ve contributed a portion of the management fee, the basis points, to the global echo foundation. It, in turn, puts money towards charitable events.”
The fund tries to generate long-term capital appreciation with an emphasis on absolute positive returns and a low correlation to traditional financial market indices. The ETF includes a focus on U.S. fixed-income, long-only global equity and alternative long/short trend following strategies. The fund’s portfolio managers allocate to sustainable fixed-income, long-only equity and alternative long/short trend-following strategies over a full market cycle.
Click here to read AdvisorShares’ 2017 Outlook on ETF Trends and NYSE’s exclusive 2017 Market Outlook Channel.