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5 ETFs to Tap Hedge Funds' First Inflow in Three Years
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With a skyrocketing stock market and an investor shift to alternative assets during a period of volatility and rising inflation, hedge funds are booming this year. In fact, these are poised to achieve positive inflows in 2021 for the first time in three years. Per the data from Preqin, hedge funds have attracted $40.9 billion inflows in the first three quarters of the year after outflows of $97.2 billion and $44.5 billion in 2019 and 2020, respectively.
Investors can easily tap the growing space in the basket form. Some of the best-performing funds of 2021 are SPDR SSGA Multi-Asset Real Return ETF (RLY - Free Report) , WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW - Free Report) , First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC - Free Report) , Global X Russell 2000 Covered Call ETF (RYLD - Free Report) and Strategy Shares Newfound/ReSolve Robust Momentum ETF (ROMO - Free Report) . Any of these could make for an exciting choice in this corner of the ETF market.
Global hedge funds have gained an average of 13.9% between January and November this year, marking their third successive year of returns above 10%. This compares with the MSCI global stock index’s gain of 12.4%. Event-driven strategies, which bet on corporate changes such as mergers and restructurings, led the surge, jumping 15.1% while equity strategies delivered a 12.3% gain. Macro strategy funds returned 7% in the first 11 months of 2021, compared with more than 14% in 2020 (read: 5 ETFs That Gained More Than 40% in 2021).
The solid trend of inflows is likely to continue next year due to increased market volatility and uncertainty over the Omicron variant of COVID-19.
What Are Hedge Funds?
Hedge fund ETFs use unique methods or offer exposure with lower-risk strategies to produce some level of outperformance. They replicate investing styles and predictions of hedge funds, providing a solid and well-diversified portfolio, which seek to outperform the broader market.
Although hedge fund ETFs charge lower fees than what investors have to pay in the “true” hedge fund space, these come with high cost compared to plain vanilla ETFs and are generally illiquid. Additionally, hedge funds are accessible only to wealthy investors or institutions as these generally require minimum investments of $250,000 and have limits on cash withdrawals (see: all the Hedge Fund ETFs here).
The above-mentioned ETFs utilize hedge fund strategies but differ in one way or the other. This suggests that investors should be able to find a good choice that matches their style and needs in this intriguing space. Below, we have highlighted them in details:
SPDR SSGA Multi-Asset Real Return ETF (RLY - Free Report) – Up 19.1%
SPDR SSGA Multi-Asset Real Return ETF seeks to achieve real return consisting of capital appreciation and current income. It offers exposure to inflation-protected securities issued domestically and internationally, domestic and international real estate securities, commodities, and publicly traded companies in natural resources and/or commodity businesses. These companies may include agriculture, energy, and metals and mining companies.
With AUM of $85.2 million, SPDR SSGA Multi-Asset Real Return ETF charges 50 bps in annual fees and an average daily volume of 44,000 shares. The fund charges 50 bps in annual fees.
WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW - Free Report) – Up 18.9%
WisdomTree CBOE S&P 500 PutWrite Strategy Fund tracks the CBOE S&P 500 PutWrite Index, a collateralized put write strategy on the S&P 500 Index. The strategy is designed to receive a premium from the option buyer by selling a sequence of one-month, at-the-money, S&P 500 Index puts. If, however, the value of the S&P 500 Index falls below the S&P 500 Index puts strike price, the option finishes in-the-money and the fund pays the buyer the difference between the strike price and the value of the S&P 500 Index.
WisdomTree CBOE S&P 500 PutWrite Strategy Fund’s strategy of selling cash-secured S&P 500 Index puts serves to partially offset a decline in the value of the S&P 500 Index to the extent of the premiums received. It has amassed $71.7 million in its asset base while charges 44 bps in annual fees. The product trades in an average daily volume of 13,000 shares.
First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC - Free Report) – Up 18.7%
First Trust Dorsey Wright Dynamic Focus 5 ETF follows the he Dorsey Wright Dynamic Focus Five Index, which is designed to provide targeted exposure to five First Trust sector and industry-based ETFs and the Nasdaq US T-Bill Index (read: 4 Sector ETFs to Win From About a 40-Year High Inflation).
First Trust Dorsey Wright Dynamic Focus 5 ETF has AUM of $220.7 million and charges 79 bps in annual fees. The product trades in an average daily volume of 7,000 shares.
Global X Russell 2000 Covered Call ETF (RYLD - Free Report) – Up 18.3%
Global X Russell 2000 Covered Call ETF seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility. It follows a “covered call” or “buy-write” strategy, in which the fund buys exposure to the stocks in the Russell 2000 Index and “writes” or “sells” corresponding call options on the same index. This is easily done by tracking the Cboe Russell 2000 BuyWrite Index.
Global X Russell 2000 Covered Call ETF has amassed $724.7 million in its asset base and charges 60 bps in annual fees. The fund trades in an average daily volume of 674,000 shares.
Strategy Shares Newfound/ReSolve Robust Momentum ETF seeks to provide momentum-based exposure to global equity regions while simultaneously avoiding significant and prolonged drawdowns. It follows the Newfound/ReSolve Robust Equity Momentum Index, charging 82 bps in annual fees.
Strategy Shares Newfound/ReSolve Robust Momentum ETF has AUM of $49.9 million and trades in an average daily volume of 6,000 shares.
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5 ETFs to Tap Hedge Funds' First Inflow in Three Years
With a skyrocketing stock market and an investor shift to alternative assets during a period of volatility and rising inflation, hedge funds are booming this year. In fact, these are poised to achieve positive inflows in 2021 for the first time in three years. Per the data from Preqin, hedge funds have attracted $40.9 billion inflows in the first three quarters of the year after outflows of $97.2 billion and $44.5 billion in 2019 and 2020, respectively.
Investors can easily tap the growing space in the basket form. Some of the best-performing funds of 2021 are SPDR SSGA Multi-Asset Real Return ETF (RLY - Free Report) , WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW - Free Report) , First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC - Free Report) , Global X Russell 2000 Covered Call ETF (RYLD - Free Report) and Strategy Shares Newfound/ReSolve Robust Momentum ETF (ROMO - Free Report) . Any of these could make for an exciting choice in this corner of the ETF market.
Global hedge funds have gained an average of 13.9% between January and November this year, marking their third successive year of returns above 10%. This compares with the MSCI global stock index’s gain of 12.4%. Event-driven strategies, which bet on corporate changes such as mergers and restructurings, led the surge, jumping 15.1% while equity strategies delivered a 12.3% gain. Macro strategy funds returned 7% in the first 11 months of 2021, compared with more than 14% in 2020 (read: 5 ETFs That Gained More Than 40% in 2021).
The solid trend of inflows is likely to continue next year due to increased market volatility and uncertainty over the Omicron variant of COVID-19.
What Are Hedge Funds?
Hedge fund ETFs use unique methods or offer exposure with lower-risk strategies to produce some level of outperformance. They replicate investing styles and predictions of hedge funds, providing a solid and well-diversified portfolio, which seek to outperform the broader market.
Although hedge fund ETFs charge lower fees than what investors have to pay in the “true” hedge fund space, these come with high cost compared to plain vanilla ETFs and are generally illiquid. Additionally, hedge funds are accessible only to wealthy investors or institutions as these generally require minimum investments of $250,000 and have limits on cash withdrawals (see: all the Hedge Fund ETFs here).
The above-mentioned ETFs utilize hedge fund strategies but differ in one way or the other. This suggests that investors should be able to find a good choice that matches their style and needs in this intriguing space. Below, we have highlighted them in details:
SPDR SSGA Multi-Asset Real Return ETF (RLY - Free Report) – Up 19.1%
SPDR SSGA Multi-Asset Real Return ETF seeks to achieve real return consisting of capital appreciation and current income. It offers exposure to inflation-protected securities issued domestically and internationally, domestic and international real estate securities, commodities, and publicly traded companies in natural resources and/or commodity businesses. These companies may include agriculture, energy, and metals and mining companies.
With AUM of $85.2 million, SPDR SSGA Multi-Asset Real Return ETF charges 50 bps in annual fees and an average daily volume of 44,000 shares. The fund charges 50 bps in annual fees.
WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW - Free Report) – Up 18.9%
WisdomTree CBOE S&P 500 PutWrite Strategy Fund tracks the CBOE S&P 500 PutWrite Index, a collateralized put write strategy on the S&P 500 Index. The strategy is designed to receive a premium from the option buyer by selling a sequence of one-month, at-the-money, S&P 500 Index puts. If, however, the value of the S&P 500 Index falls below the S&P 500 Index puts strike price, the option finishes in-the-money and the fund pays the buyer the difference between the strike price and the value of the S&P 500 Index.
WisdomTree CBOE S&P 500 PutWrite Strategy Fund’s strategy of selling cash-secured S&P 500 Index puts serves to partially offset a decline in the value of the S&P 500 Index to the extent of the premiums received. It has amassed $71.7 million in its asset base while charges 44 bps in annual fees. The product trades in an average daily volume of 13,000 shares.
First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC - Free Report) – Up 18.7%
First Trust Dorsey Wright Dynamic Focus 5 ETF follows the he Dorsey Wright Dynamic Focus Five Index, which is designed to provide targeted exposure to five First Trust sector and industry-based ETFs and the Nasdaq US T-Bill Index (read: 4 Sector ETFs to Win From About a 40-Year High Inflation).
First Trust Dorsey Wright Dynamic Focus 5 ETF has AUM of $220.7 million and charges 79 bps in annual fees. The product trades in an average daily volume of 7,000 shares.
Global X Russell 2000 Covered Call ETF (RYLD - Free Report) – Up 18.3%
Global X Russell 2000 Covered Call ETF seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility. It follows a “covered call” or “buy-write” strategy, in which the fund buys exposure to the stocks in the Russell 2000 Index and “writes” or “sells” corresponding call options on the same index. This is easily done by tracking the Cboe Russell 2000 BuyWrite Index.
Global X Russell 2000 Covered Call ETF has amassed $724.7 million in its asset base and charges 60 bps in annual fees. The fund trades in an average daily volume of 674,000 shares.
Strategy Shares Newfound/ReSolve Robust Momentum ETF (ROMO - Free Report) – Up 17.9%
Strategy Shares Newfound/ReSolve Robust Momentum ETF seeks to provide momentum-based exposure to global equity regions while simultaneously avoiding significant and prolonged drawdowns. It follows the Newfound/ReSolve Robust Equity Momentum Index, charging 82 bps in annual fees.
Strategy Shares Newfound/ReSolve Robust Momentum ETF has AUM of $49.9 million and trades in an average daily volume of 6,000 shares.