ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. This Week’s ETF Launches: Time To Manage Some Risk?
News
Share

This Week's ETF Launches: Time To Manage Some Risk?

Aaron LevittApr 19, 2017
2017-04-19

There’s this idea bubbling up to the surface that stocks may be getting a little expensive. After all, we’ve had roughly eight years of rising equity prices. That’s given way to potentially overpriced stocks. Earnings and revenues certainly haven’t kept up with current valuations. And let’s not forget the current geopolitical situation in the United States, France, China, etc. Risk is back on the table.

With investors likely getting nervous, ETF sponsors have taken notice. This week’s round of new fund launches were all about hedging away those risks and potentially saving investors from the upcoming drop in the markets. For investors, these new products could provide them with the peace of mind needed to get through the next couple of years.

TickerNameIssuerLaunch DateETFdb.com CategoryExpense Ratio
(ERM C)EquityCompass Risk Manager ETFFirst Trust04/10/2017Diversified Portfolio0.65%
(TERM C+)First Trust EquityCompass Tactical Risk Manager ETFFirst Trust04/10/2017Diversified Portfolio0.65%
(TAIL B+)Cambria Tail Risk ETFCambria Investments04/06/2017Diversified Portfolio0.59%
(XSHQ B-)PowerShares S&P SmallCap Quality PortfolioPowerShares04/06/2017Small-cap Blend Equities0.29%
(SPVM B-)PowerShares S&P 500 Value With Momentum PortfolioPowerShares04/06/2017Large-cap Value Equities0.30%


Content continues below advertisement

First Trust Takes an Active Approach

Investment manager First Trust continues to expand its already expansive ETF lineup with two actively managed funds designed to take the risk-on/risk-off issue head-on. The First Trust EquityCompass Risk Manager ETF (ERM C) and First Trust EquityCompass Tactical Risk Manager ETF (TERM C+) both follow a similar strategy of hedging risk.

ERM and TERM will both hold U.S. large-cap stocks during good times and can invest all or a portion of their portfolios in cash, cash equivalents or short-term fixed-income during periods of high volatility or crashes. The idea is that avoiding losses is better than riding through them, as it produces higher returns when the market finally recovers as capital bases are larger.

The major difference between the two new ETFs is that TERM can also go “short” U.S. markets by using futures and other securities. This allows TERM to profit from significant drawdowns and the exposure should give TERM a slight edge over ERM if times get terrible.

The question for investors is just how much risk hedging they want, as both ETFs charge just 0.65% in expenses.

For a full list of all of First Trust smart beta ETFs, check out its issuer page here.

An ETF Veteran Fights Tail-End Risk

Popularizing the idea of multi-asset ETFs, industry veteran Mebane Faber and Cambria Investments is back with its latest ETF, the Cambria Tail Risk ETF (TAIL B+). As the name implies, TAIL will seek to eliminate risk and reduce the overall loss of a portfolio during market crashes.

The actively managed fund uses a unique strategy to limit overall risk. TAIL will hold cash and U.S. government bonds as its primary holdings. The ETF will then implement a put option strategy on U.S. equities. The idea is that these options – which do include exposure to out-of-the-money puts – provide a hedge against tail risk. They will be more valuable as the market tanks.

In the end, the combination of bonds/cash and these out-of-the-money puts will make TAIL a great ETF when the markets go crazy. However, when the markets aren’t in freefall, the price of the puts will cause TAIL to lose money. This is strictly a hedge against disaster and investors should realize that before they pull the trigger.

Expenses for TAIL run 0.59%, which is not outrageous for an actively managed fund using options.

Check out our Mutual Fund to ETF tool and learn how you can get more bang for your buck when it comes to bear market funds.

PowerShares Expands Its Factor Lineup

Investment manager PowerShares continues to be the smart-beta leader and slices up equity and bond markets further via factors. Its two latest launches use a combination of fundamentals.

The PowerShares S&P SmallCap Quality Portfolio (XSHQ B-) will seek to provide exposure to “better” small-cap companies. Quality of earnings is one of the main fundamental factors that determine long-term success. XSHQ will screen the broader small-cap-focused S&P 600 for those stocks with the best return on equity, accruals ratios and financial leverage ratio scores. The top 120 small-caps are then weighted and ranked by their scores. XSHQ costs 0.29% in expenses.

The PowerShares S&P 500 Value With Momentum Portfolio (SPVM B-) seeks to combine both “value” and relative strength factors. By selecting those stocks that are cheap and combining it with those that also have momentum behind them, SPVM hopes to provide a bigger return than that of the broader S&P 500. It’s basically finding those castaway stocks that have been recently refound by investors. Mean reversion is a powerful performance element, and SPVM is designed to capitalize on that fact. The ETF charges 0.30% in expenses for the two factors.

For a list of all new ETF launches, take a look at our ETF Launch Center.

The Bottom Line

Risk is back on the table, and investors are clamoring for solutions to help them fight the potential meltdown. ETF sponsors are happy to help. This week’s round of launches will provide a portfolio with an active way to hedge away some of their overall risks and prevent significant drawdowns.

Sign up for ETFdb Pro and gain access to more than 50 all-ETF model portfolios, each of which is backed by a unique investment thesis.

» Popular Pages

  • Tickers
  • Articles

Feb 03

Impressive First ETF Year From Capital Group

Feb 03

3 Long-Term Trends Boost Outlook for These ETFs

Feb 03

Famous Investor Says Bitcoin Has $1 Million Potential

Feb 03

3D Printing ETF PRNT Accesses $500 Billion Opportunity

Feb 03

Parent S&P 500 Beaten by Equal Weight in January

Feb 03

This ETF May Be Propelled by Sustainable Bond Issuance

Feb 02

A Value Manager’s Perspective on an Early Pivot

Feb 02

The Metaverse

Feb 02

ETF of the Week: Invesco S&P 500® Equal Weight ETF

Feb 02

Stepping Into the ETF Business? Think Twice

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

SMH

VanEck Semiconductor ETF

XLK

Technology Select Sector SPDR...

VTI

Vanguard Total Stock Market...

SOXX

iShares Semiconductor ETF

BLOK

Amplify Transformational Data...

META

Roundhill Ball Metaverse ETF


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X