Displaying items by tag: ETFs

(New York)

The inverted yield curve has investors feeling down on their luck at the moment. What is the best way to play the turmoil and volatility? The answer may be in two seemingly unlikely places. The first is in energy ETFs, especially oil. Energy stocks have traditionally done very well during inverted yield curves, so an ETF like XLE seems like a good bet right now. Additionally, tech ETFs such as Vanguard’s VGT could be a good play, according to Bloomberg. Tech has often done well during inversions in the past.

FINSUM: Recommending a tech ETF right now is the height of contrarianism. Tech is basically caught in the middle of the trade war, and frankly, seems like a bad buy.

(New York)

With all of the volatility of the last months, bond ETFs are taking on a new life. As an asset class, bond ETFs have surged in popularity in recent years as a much easier and cheaper way of accessing bond market liquidity. Recently, bond ETFs have seen their role morph. Whereas they have often been seen as a safe haven from periods of volatility, they are now being used as a risk management tool, says the head of iShares U.S. Wealth Advisory Product Consulting at BlackRock.

FINSUM: So many of the newer bond ETFs are designed to thrive in volatile markets, not just provide a low volatility safe haven. This means they are more of a proactive than reactive product.

(New York)

Everyone is trying to figure out how to protect their own and clients’ portfolios from a trade war. “Which sectors will be the hardest hit”, “and by how much” are common questions. Well, a small Virginia based ETF provider has just come to the market with a new fund that is designed to protect investors from that very issue. The new ETF, TWAR, is designed to track 120 companies who are likely to outperform the market during a trade war because of “government patronage”, or special contracts or subsidies which insulate them.

FINSUM: There is some skepticism in the market about this approach, but it does stand to reason that companies who are less exposed to global trade will suffer less than the market.

(New York)

ETFs are obviously the biggest financial product of the decade, and have been very broadly adopted by advisors. However, how advisors actually use them varies greatly, partly due to the diversity of the asset class. There are around 2,200 ETFs covering a seemingly endless variety of niches. But within that cornucopia of offerings, which can be dizzying, lays the opportunity to personalize. Specifically, the large variety of highly specialized approaches allows advisors to be very tactical with portfolios without the need to buy specific stocks. Further, since ETFs are replicating a benchmark, they do not suffer from “style drift” like mutual funds do. In that way, the sectors/niches they track are more reliable and can be depended on for the role they play in a portfolio.

FINSUM: This might be obvious to some, but there are many out there who still only use ETFs are ultra-cheap trackers. Some of the new offerings provide really interesting exposure to specific areas—part of the reason they have been heavily adopted by hedge funds.

(New York)

Bond ETFs ae set to break a landmark record this year—$1 tn in AUM. The number is a big deal for bond ETFs, which got off to a slower start than their equity counterparts. In recent years, though, bond ETFs have seen huge inflows as they allow investors a more liquid option for both strategic and longer-term allocations. The market is also seeing a good deal of innovation, with more nuanced approaches spreading much like they have in equities.

FINSUM: Overall this is excellent news for investors. More AUM means more liquidity, more options, and lower costs. There are still some fears about a liquidity mismatch between the ETF and the underlying blowing up during a crisis, but those have never materialized.