Tag Archives: SPLV

Upcoming Elections in Greece Make ETF Markets Volatile

MarketMuse update courtesy of Todd Shriber from ETF Trends.

The Global X FTSE Greece 20 ETF (NYSEArca: GREK) is off 3% to start 2015 and with anxiety running high that Greece is still a candidate for departure from the Eurozone, global equity market volatility and investors’ skittishness is on the rise.

With Greek elections slated for Jan. 25, global investors are understandably nervous about what the Eurozone will look like in the future. While Moody’s believes Greece’s Eurozone departure probability is not as high today as it was in 2012, there are still negative implications with such an event for fellow Eurozone nations.

Investors can mitigate Greek volatility with a familiar source: U.S.-focused low volatility ETFs, which outperformed traditional benchmarks in 2014. That group includes thePowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV).

“The relative performance of the S&P 500 Low Volatility Index during the Greek crisis in 2011 and 2012 offers insight into risk mitigation,” according to a recent note by PowerShares.

A favored measuring stick for gauging Eurozone volatility is 10-year government bond yields, but combining that with how SPLV’s underlying index performed against the S&P 500 during periods of elevated Eurozone stress proves instructive for investors.

In the chart below, “the red line shows the performance of the S&P 500 Low Volatility Index relative to the S&P 500 Index, based on weekly closing data. When we compare the red line with the blue line, we see that the S&P 500 Low Volatility Index outperformed the S&P 500 Index during each wave of credit stress in the Eurozone,” notes PowerShares.548x445xsplv.png.pagespeed.ic.RdYuDOmWxM












For original article from ETF Trends, click here.

Beware of Index Funds That Aren’t

wsjlogoCourtesy of Michael Pollock, Wall Street Journal

Index funds aren’t always what you think they are. And your innocence could cost you.

To most investors, of course, index funds are passive investments, providing returns that basically mirror the market they are designed to follow. They charge low fees and carry no hidden costs.

But the old definition is starting to change. Unlike simpler, earlier generations of index and exchange-traded funds, new variations are morphing into products that risk putting many investors afoul of the old rule about not investing in things you don’t understand.

As more money flows toward indexing, some fund firms are trying to capture a share of it by creating complex ETFs that blend active management and indexing. The fees charged by some of these funds can be several times those charged by traditional index funds. And, because they sometimes specialize in very narrowly defined, less-active markets, they can wrack up hidden trading costs.

Consider one newer, complex index fund, IQ Hedge Multi-Strategy Tracker, a four-year-old ETF from IndexIQ Advisors LLC that tries to duplicate the returns of hedge-fund investments. For example, when hedge funds go “short” in a certain market, betting that prices will decline, IQ Hedge mimics that activity by taking a short position in an ETF that focuses on that market. Hedge funds follow lots of complex strategies in many different markets, however, and IQ Hedge tries to copy many of them simultaneously.

It requires considerable expertise to know how to use such an index fund effectively in a diversified portfolio. “Investors who aren’t sophisticated in sector rotation and asset allocation might be making a mistake to invest in some of these new, complex products without understanding what’s inside each fund,” says Anthony Hohmann, who oversees ETF analytical products at S&P Capital IQ, a unit of McGraw-Hill Cos.

That doesn’t mean the newer funds aren’t worth looking at. But before you buy, here are some things to consider.

For the balance of the WSJ article, please click here

Hedge Is The Word For 2013-ETFs For the Risk-On Risk-Off Universe


Courtesy of Brad Zigler. This article first appeared in the February 2013 issue of REP/WealthManagement.com.

In 2013, the market for alternative investment exchange-traded products seems to revolve around one word. That word is “hedge.” Judging by their proportion of regulatory filings and launches last quarter, product sponsors are keen on risk-controlled equity and bond plays.

No surprise there, really. After all, we’re just emerging from one of the most volatile periods in market history. Investors – and their advisors – are still a little dizzy after being buffeted by the frets of an impending “fiscal cliff,” a meltdown of the eurozone, further ballooning of the federal deficit and fears of potential asset bubbles.

Overall, the prospects for 2013 are mixed at best. Stocks, while not the raging bargains they were during the recent recession, may still be attractively priced, but their dynamics have changed. The recent equity rebound has largely been market driven. Value plays, starting in early 2009 as corporate profits widened, are now becoming sparse. Currently, the market is reacting more to political influences such as Fed policy and the deficit debate, causing some pundits to forecast an even riskier environment ahead. With such prospects, they say, a little hedging and bond buying seems prudent. Exchange-traded product manufacturers are happy to oblige.

Hedged Equity

Funds and notes geared to dampen market volatility have proliferated in the wake of the 2008-2009 crash. Some have enjoyed extraordinary success attracting assets. Witness, for example, the Invesco PowerShares S&P 500 Low Volatility Portfolio (SPLV), which has pulled in more than $3 billion since its May 2011 debut. SPLV is essentially a passive hedge. The fund mirrors a 100-stock portfolio, carved from the S&P 500 Index, representing issues with the lowest 12-month trailing volatility.

Invesco now offers investors a more sophisticated approach to managing volatility with its December 2012 launch of the PowerShares S&P 500 Downside Hedged Portfolio (PHDG). Like SPLV, the new PowerShares fund invests in U.S. stocks but hedges downside risk through futures contracts linked to that well-known “fear gauge,” the CBOE Volatility Index (VIX). Continue reading