Rising inflation and the Fed’s shifting monetary policy—two key themes that investors will need to watch out for in 2022. To meet the challenges that lie ahead, investors may want to consider adapting their traditional portfolio mix with institutional-class alternative strategies.
In the upcoming webcast, Inflation and Rising Rates: An Advisor’s Playbook For 2022, Jose Cherian, Senior Product Manager, Vident Financial; and Scott Peng, Founder & CEO/CIO, Advocate Capital Management, will highlight alternative strategies investors can use to prepare their portfolios for a rapidly evolving market environment.
For example, something like the U.S. Diversified Real Estate ETF (NYSE Arca: PPTY) can help investors gain diversified exposure to real estate investment trusts and the yield opportunities that this segment of the market presents.
PPTY’s portfolio is constructed based on the actual properties held by each company in the investment universe. The smart beta index-based ETF screens for four primary factors when investing in real estate, including location, property type, leverage, and governance.
Location can affect the value of a property and is a crucial driver of real estate performance. Stable targets are used to diversify geographic exposure while favoring dynamic, high-growth locations.
Differences between property types also produce varying results. The fund’s fixed allocations seek to ensure diversification and balance.
Leverage and governance factors are further included to reduce exposure to higher-risk companies. The responsible use of leverage can potentially enhance returns, but taking on too much debt is risky, so the portfolio includes companies with prudent leverage. Additionally, firms with significant governance risks like external management are excluded from the portfolio to diminish further unknowns.
Additionally, Advocate Capital Management recently launched the Advocate Rising Rate Hedge ETF (RRH), an active fund that uses Treasury securities and derivatives for a strategy that looks to benefit, should long-term yields increase faster than short-term yields. The strategy is a multi-asset ETF that seeks to generate capital appreciation during periods of rising long-term interest rates, specifically interest rates with maturities of five years or longer.
The actively managed RRH seeks to achieve its investment objective primarily by investing in a combination of U.S. Treasury securities; forwards, futures, or options on various currencies; long and short positions on the short and long-end of the Treasury or swap yield curve via futures, swaps, forwards and other over-the-counter (“OTC”) derivatives; long and short positions on equity indexes and/or investment companies, including ETFs; and commodity futures and options.
Financial advisors who are interested in learning more about strategies for inflation and rising rates can register for the Friday, December 17 webcast here.