The fixed-income and equities markets have extended their bull run but their momentum is beginning to fade. With valuations high and risks ahead, investors should look to an alternative exchange traded fund strategy to hedge their portfolios.
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On the upcoming webcast, Look to Alternatives as Traditional Stocks, Bonds Run on Fumes, Jillian DelSignore, Executive Director and Head of ETF Distribution at J.P. Morgan Asset Management, Yazann Romahi, Portfolio Manager and Head of Global Multi-Asset Research in the Multi-Asset Solutions Team at J.P. Morgan Asset Management, and Mark Matthews, Investment Research Analyst at CLS Investments, will outline various alternative strategies and ways the asset category can provide uncorrelated returns to traditional bond and stock investments to diversify a portfolio.
For instance, the recently launched JPMorgan Diversified Alternatives ETF (NYSEArca: JPHF), J.P. Morgan’s first actively managed ETF to hit the market, combines various hedge fund-esque, alternative investment strategies in an easy-to-use ETF wrapper.
Specifically, JPHF will include equity long/short, event driven and global macro based strategies. The fund is managed by Rohami and Victor Lee, Managing Director and a Regional Specialist at J.P. Morgan.
The equity long/short strategy involves simultaneously taking equities that are attractive based on relevant return factors and selling equities that are unattractive based on relevant return factors. The long/short strategy will try to produce alpha through exploiting pricing inefficiencies between equity securities through long and short positions.
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The event driven strategy will try to profit from companies on the basis that a specific event or catalyst will affect future pricing. For example, merger arbitrage strategies try to capitalize on price discrepancies and returns in corporate transactions.
Lastly, the global macro based strategy tries to exploit macro economic imbalances across the globe. The strategy may be implemented through a number of asset classes, including stocks, bonds, currencies and commodities.
The group of liquid alternative funds has been a growing investment category following the financial downturn as more investors turned to alternative investment avenues in an attempt to diversify their portfolios. The group of liquid alt funds that categories like equity long/short, event driven, relative value, macro and multistrategy often did better than the hedge fund indices.
Liquid alternative funds provided a much cheaper way to access the same kind of hedge fund-esque exposure – hedge funds may include a normal management fee of 1% to 2% on top of a performance fees of as much as 20% of annual gains.
Potential investors should be aware that these types of investments are not meant as growth strategies to generate outsized returns in investment portfolios. In reality, these strategies are doing exactly what they were made for, diminishing volatility. Consequently, in bullish market conditions, the strategies may underperform, but if the markets sour, alts can shine.
Financial advisors who are interested in learning more about alternative investment strategies can register for the Thursday, September 15 webcast here.
This article was provided by our partners at ETFTrends.