If there’s one consistent question we have gotten from financial advisors this fall, it’s this: how do you stay invested, while still managing risk? For some advisors, the answer has been hyper-diversification, but that approach may yield lackluster and even inconsistent results. But there are other ways: take explicit hedged approaches including ETFs that use options strategies.
In the upcoming webcast, Fact & Fiction About Hedging Strategies, Phillip Toews, Portfolio Manager, Agility Shares; and Dan Kullman, Head of Education and Training, Toews Asset Management, will walk through how to position risk-managed strategies into portfolios, and a distinct approach to managing market risk in 2021.
Specifically, the Agility Shares Managed Risk ETF (MRSK) seeks to provide index-like returns, with put options in place to attempt to limit losses. Managed Risk may help investors lower drawdown and lessen risk during bear markets, according to Agility Shares.
The portfolio maintains an always-hedged equity position designed to participate in bull markets while maintaining a managed amount of risk. The ETF is always long equities and hedged against downturns, with no stock picking. Overall, the fund is designed to seek equity-like returns in a bull market and attempt to limit losses in a market downturn.
The Agility Shares Managed Risk ETF follows a four-step process. First, the foundation of the portfolio is an allocation to equities in the form of equity index futures. Secondly, the ETF defines the maximum loss of domestic equity exposure through the implementation of an options strategy through purchases of at-or-near-the-money two-year equity index put options, rolled annually. The fund then attempts to mitigate the cost of hedging strategy by writing out-of-the money equity index calls and put options spreads. Finally, it can generate additional returns with an allocation to aggregate bonds that are tactically managed, which may help to manage interest rate risk.
Financial advisors who are interested in learning more about hedging strategies can register for the Wednesday, December 9 webcast here.