A New Era for Risk: Managed Risk Strategies | ETF Trends

Investors don’t always notice when regimes shift. Even as interest rates rose at an almost unprecedented speed and are back to levels not seen in more than a decade, investors have in many ways stuck to what worked in a low rate regime. The return of an active, fluctuating interest rate environment may invite investors to take a look at managed risk strategies as a strong option with rates a factor once more.

Managing risk was a key topic of discussion at the ETF Exchange conference in Miami this year. There, NYSE TV’s Floor Talk, hosted by Judy Shaw, invited leaders from firms like Innovator ETFs and Calamos Investments to discuss their own managed risk strategies.

The duo, Innovator ETFs’ VP of sales Trey Martin and Calamos Investments’ Head of ETFs Matt Kaufman, shared their thoughts on that matter.

Per Calamos’ Kaufman, the rate environment’s shift has made a big impact. While many assets came into investment strategies during an era of low rates, investors may want strategies that manage risk for high rate environments.

“A lot of products are focused on managing risk in a low rate environment, but how are you managing risk in a high rate environment?” he said. “In an era when bonds weren’t providing much risk management or much income, that was back then.”

“Today we’re in a new environment, and so we’re really focused on building products that are going to manage risk in the future,” Kaufman added.

Managed Risk Strategies and ETFs

The firm offers strategies like the Calamos Convertible Equity Alternative ETF (CVRT). The fund charges 69 basis points and launched in October last year. It focuses on convertible securities with a high degree of equity sensitivity. It includes preferred stocks and structured notes on top of convertible bonds. The ETF has returned 3.5% over the last three months, per Calamos Investments’ data.

Innovator’s Martin spoke to the merits of managed risk strategies that help investors stay in the market amid uncertainty.

“We’re trying to provide solutions that allow investors to confidently remain invested even when there’s uncertainty ahead,” Martin said. “We believe we have solutions to help investors do just that.”

The firm offers ETFs like the Innovator Equity Managed Floor ETF (SFLR). The strategy actively invests for an 89 bp fee. It seeks to provide capital appreciation via large-cap U.S. stocks while hedging downside risk via a laddered options strategy. It uses four, one-year FLEX options to do so. SFLR has returned 25.6% over one year, per Innovator ETFs’ data.

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