Are you worried about the AI bubble? Subscribe to the Daily Upside for insightful and actionable market news, designed for investors.
The Pivot. Pivot! PIVOT!
That’s not all Ross screams as he, Chandler and Rachel try to drag the couch up the steep stairs in the episode of Friends. It’s also a niche strategy in the ETF world.
Moving from one asset to another due to market conditions is nothing new, but its use within an ETF remains rare. Alongside buffer ETFs and passive funds, the following products fit into broader risk management strategies. Clients give up some flexibility to gain some measure of protection by switching to defensive assets when markets slide. There are the following 32 ETFs now trading on US exchanges with total assets under management of $3.5 billion, per etf.com data. As advisors continue to seek protection from market volatility, issuers are positioning the following products as a key component of portfolios.
“If you’re looking at these from a holistic return perspective, you’re not going to get much because you’re probably going to be out in the morning,” said Dan Sotiroff, associate director at Morningstar. He added that these strategies can also be vulnerable to false positives and whiplash, causing allocations to change at inopportune times.
Subscribe to Daily Upside for free to get premium analysis on all your favorite stocks.
READ ALSO: What does the FIFA World Cup mean for ETFs again What Makes Some Regulators ‘Remorse’ About Leveraged Single-Stock ETFs
Change It Up
A recent example is the Global X Adaptive Risk Managed Yield ETF (RMHY).
“It allows you to play a bit more of a risk, knowing that you have a risk management hedge that can take it easy, if that property rots quickly,” says Patrick Bobbins, chief investment officer at Adaptive Wealth. Global X’s third partnership is with Adaptive Wealth Strategies, the investment management arm of NorthCrest, and comes with an expense ratio of 35 basis points.
There are also a number of other funds in the category:
-
A great trend-following bag is The Invesco Emerging Markets Sovereign Debt ETF (PCY) has $1.42 billion in assets, per etf.com.
-
The Pacer Trendpilot US Large Cap ETF (PTLC), which moves between the S&P 500 and Treasuries based on a 200-day moving average signal, and the Pacer Trendpilot US Bond ETF (PTBD), which also switches between high-yield bonds and Treasuries, are two other examples.
