Displaying items by tag: ETFs

Investors are increasingly turning their attention to small-cap stocks and ETFs due to a combination of favorable valuations, historical trends, and recent market dynamics. This renewed interest has been highlighted by a significant rally in small-cap stocks, particularly during July when the Russell 2000 recaptured much of its earlier underperformance relative to large-cap indices. 

Analysts suggest that small-caps are still undervalued, with some estimates indicating a 20% to 30% discount compared to larger stocks. This presents a potential opportunity for prolonged outperformance in the small-cap sector. Notable options include the iShares Russell 2000 ETF (IWM), which tracks a broad index of small-cap companies, and the Vanguard Small-Cap Value ETF (VBR), which focuses on value-oriented small-cap stocks.

 Each of these ETFs provides investors with a strategic entry into the small-cap market, with varying levels of risk and potential return depending on their investment goals.

Finsum: Also note that as interest rates come down small caps are historically in a position to take advantage because they are more levered. 

J.P. Morgan Asset Management has appointed Travis Spence as the global head of ETFs, underscoring its strategic focus on leading the active ETF market. Spence, a 20-year veteran at the firm, will manage ETF product development, capital markets, and the newly established ETF insights team, while continuing to lead distribution across Europe, the Middle East, and Africa (EMEA). 

His previous leadership in expanding J.P. Morgan's active ETF presence in Europe positions him well to guide the firm’s next phase of growth. The global ETF platform has already expanded to nearly $190 billion across more than 100 products, securing J.P. Morgan's position as second in active ETF assets under management (AUM) and eighth overall globally.

Active ETFs continue to make strides in growth along their passive counterparts and have made substantial strides this year. 

Finsum: Active management is really about the harmony of merging quantitative insights with the best portfolio risk practices. 

The T. Rowe Price International Equity ETF (TOUS) is an active ETF that has gained attention for its diversification benefits, especially after a recent market sell-off. With a competitive 50 basis point fee, TOUS focuses on high-quality international firms with strong business models and good valuations. 

TOUS has an active strategy built around macro factors through an international lens that uniquely positions it for the type of interest rate volatility the US is experiencing. 

The fund’s active management allows for flexibility in selecting companies, particularly in non-U.S. markets, which could be advantageous during volatile periods. TOUS has returned 9.8% over the past year, making it an appealing option for diversification away from U.S. mega-caps.

Finsum: We’ve been banging the drum on the need to diversify into active funds during this volatility and this recent flash was an example why. 

Investors concerned about exchange-traded funds (ETFs) with options overlays limiting returns should consider the benefits these strategies offer. According to Tony Rochte, Morgan Stanley’s global head of ETFs, options serve as a hedge against significant losses, offering downside protection even if upside gains are capped. 

This approach encourages investors to re-enter the broad-based equity market, reducing their exposure to fixed-income products. Alison Doyle, Nasdaq’s head of ETP listings, highlighted the growing popularity of active ETFs, with over 75% of all ETF launches in 2023 being active. 

Among these, a significant portion included options-embedded strategies, providing additional risk management tools. This trend shows a shift from traditional fixed-income investments to risk assets.

Finsum: With stocks and bonds becoming more correlated, investors should consider outside strategies like overlays to hedge. 

Goldman Sachs Asset Management has rolled out the Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF), marking its fifth ETF launch in 2024. This new fund targets high monthly income by investing in U.S. preferred stocks and hybrid securities, which currently offer yields between 6-7%, benefiting from the expected Federal Reserve rate cuts.

This strategy is designed to maximize yield while providing diversification benefits, as preferred stocks typically have lower correlations to core investment-grade fixed income. 

Following the fund’s introduction, GPRF has quickly accumulated nearly $20 million in inflows. The launch of GPRF complements Goldman’s ongoing expansion into municipal bond ETFs, adding to the firm’s growing portfolio, which now includes 43 ETFs.

Finsum: ETFs are an interesting way for investors to get exposure to preferred stock.