If you were to ask AdvisorShares Founder and CEO Noah Hamman what investors and advisors were looking for a year or two ago, he might have said “yield and income.” But now, that’s changed dramatically. What he’s hearing from clients these days is “mostly an interest in alternatives and tactical asset management.”
“Even though this year has started off strongly, more interest rate hikes [are expected]ahead, and we still have a war going on in Eastern Europe, so people are nervous, and wanting to protect their assets,” Hamman told VettaFi at Exchange: An ETF Experience.
Among the alternatives and tactical asset strategies that advisors are looking for, AdvisorShares has the AdvisorShares Ranger Equity Bear ETF (HDGE) and the AdvisorShares Dorsey Wright Short ETF (DWSH), which short stock and “have performed well… in bear markets,” according to Hamman. The ETF issuer also has two long strategies from Dorsey Wright, the global tactical strategy AdvisorShares Dorsey Wright FSM All Cap World ETF (DWAW) and the U.S.-focused tactical strategy AdvisorShares Dorsey Wright FSM US Core ETF (DWUS).
In addition to a growing appetite for tactical asset management strategies, Hamman has also seen an increased interest among advisors in thematics. After seeing firms like Global X succeed with their thematic ETFs and larger firms copying their success, the AdvisorShares CEO noted that he feels like advisors “are moving away from the style box and starting to look at investing more thematically.”
AdvisorShares has a lineup of thematic ETFs that includes the AdvisorShares Hotel ETF (BEDZ), the AdvisorShares Psychedelics ETF (PSIL), the AdvisorShares Drone Technology ETF (UAV), and the AdvisorShares Pure Cannabis ETF (YOLO), among others.
“I think [thematic investing is]shaping the landscape of how advisors are building their portfolios, but I think we’re just at the early stage,” he added.
2023 Could be “A Rough Year”
Hamman said he’s taking the Federal Reserve at their word that they’re going to keep raising interest rates to get inflation down to the levels that they want. “I don’t like to be in the Fed guessing game,” he said.
But he also noted: “if there is risk ahead, if there’s more rate increases, if there genuinely is a reduction in the Fed’s balance sheet, which could pull liquidity out of the market,” then it’s possible that 2023 could be “a rough year this year” in which markets drop as much as 30% (though that is a worst-case scenario).
“Could this be a down 10, 20, 30% year? It could be. I hope it’s not. I hope it’s a soft landing and I hope the economy bounces back up,” he said. “But they [the Fed] seem to be still committed to reducing their balance sheet. And so, if the Fed gets more aggressive, it could be a rough, rough year.”