Look Who’s Shorting Deutsche Bank
Ranger Equity Bear is the only ETF that incorporates fundamental-driven stock selection. Here’s what it’s betting against now.
It was a slap in the face to investors. After two full months of trading without a move greater than 1% in either direction in the Standard & Poor’s 500 index—a period in which the index hit multiple record highs—a sudden 2.5% one-day swoon earlier this month broke the calm. Wall Street strategists recently surveyed by Barron’s are more pessimistic about future equity returns than at any point since the wake of the technology bubble.
That means now may be an opportune time for investors to reacquaint themselves with bear funds, which employ short-sellers to bet against certain parts of the market. The funds are meant to guard portfolios against the brunt of sharp declines. It should be no surprise that this group has fared badly over the past few years as major stock benchmarks have rallied mightily.
But hedging, or protecting against, stock-market declines could be coming back into style. Though there are a handful of actively managed bear-market funds available to retail investors, the $198 million AdvisorShares Ranger Equity Bear exchange-traded fund (ticker: HDGE) is the only ETF that incorporates fundamental-driven stock selection to find its bearish bets.
Short-selling active managers earn their salt just like long-oriented stock pickers: beating the benchmark. The AdvisorShares ETF has tended to dart higher when markets tumble than its main rival, the ProShares Short S&P 500 ETF (SH), which is designed to move in the opposite direction of the S&P 500 each day. Take the period from late 2015 through early February, a bout of market duress that was kick-started by the Federal Reserve’s first interest-rate increase in nearly a decade. The actively managed AdvisorShares ETF rose nearly 26% as the S&P 500 fell 13%. This return roughly doubled that of the ProShares ETF over the same period.
|Education:||B.A., University of Texas|
Even if an investor isn’t interested in the bear-fund category, there are insights to be gleaned from managers who make a living betting against stocks. Barron’s sat down with Brad Lamensdorf, a co-manager at Ranger Alternative Management, which has been running the short-selling ETF since its launch in January 2011.
Given the ETF’s unique requirement for daily transparency, investors can take peeks into its portfolio each day for glimpses of its short positions. Here are excerpts from our chat with Lamensdorf about what stocks the ETF is betting against right now.
Click here for entire article including latest on HDGE holdings.
Barron's review of investing book "What's Behind the Numbers: A Guide to Exposing Financial Chicanery" informative with lively prose. Calls book a guide "to avoid land mines in your portfolio."
Barron’s features AdvisorShares Peritus HighYield (HYLD) actively managed ETF as successfully avoiding the “ETF bid” by buying bonds outside the indexes’ purviews.
Off Limits for Bond IndexersBy BRENDAN CONWAY
Flows in and out of bond-index ETFs can distort prices as the underlying bonds swing higher and lower. ETFs like AdvisorShares Peritus High Yield avoid the "ETF bid" by buying bonds outside the indexes' purviews.
. . . The rise of index investing is also creating opportunities in active management. The managers of the AdvisorShares Peritus High Yield ETF (HYLD), the only actively managed junk-bond ETF, have beaten both the iShares fund and the SPDR Barclays Capital High Yield Bond ETF (JNK) by about two full percentage points this year; they've returned 12.5%, 10.4%, and 10.6%, respectively. Manager Tim Gramatovitch stresses the hunt for value in bonds that index trackers are prohibited from owning. The SPDR fund can buy only a little more than a quarter of the available bond universe because it's barred from owning bonds from tranches below $600 million, he notes.
Gramatovitch recently warned clients that the passive funds "have no ability to deal with risks in the current credit market," on account of what he views as likely defaults, restructurings, or losses on called bonds. If the active strategy's outperformance in a "risk on" market seems surprising, it's at least partly explained by HYLD's superior 8.3% 12-month yield. If it keeps up, you'll know that the hunt for value outside indexes is real. The active strategy isn't without its trade-offs: The fund charges a mutual-fund-like 1.36% expense ratio.