On the list of ultra-competitive U.S. industries, ETFs merit a place in the conversation. It’s an understatement to stay it’s tough for issuers of new ETF products to stand out. Many try. Few succeed.
With help from the Unlimited HFGM Global Macro ETF (HFGM ), Bob Elliott’s Unlimited ETFs is showing it’s a worthy competitor in the ETF arena. HFGM, which replicates hedge fund strategies via the ETF wrapper, recently topped $50 million in assets under management (AUM), pushing Unlimited’s AUM tally north of $100 million.
For those thinking “What’s the big deal?,” consider the following. HFGM competes against a slew of established rivals, and it’s flirting with $52 million in AUM after coming to market in April. That’s a solid trajectory. Add to that, three of Unlimited’s four ETFs, including HFGM, came to market this year. That is to say, the issuer is on the right path.
On a recent webcast hosted by VettaFi Investment Strategist Cinthia Murphy, Elliott discussed Unlimited’s success and how HFGM is playing a role in that equation. Among points of interest, Elliott and Murphy delved into the convenience of alternative investments like HFGM in the ETF wrapper and how hedge fund replication strategies can benefit advisors and investors.
Honing in on HFGM
While HFGM may fit the bill as a “hedge fund ETF,” it’s important the ETF isn’t a direct investment in a hedge fund. In fact, the Unlimited ETF doesn’t invest in hedge funds or the underlying holds of those money managers.
HFGM “will not engage in certain types of investment activities that are permissible for hedge funds. For example, hedge funds may use more leverage than the Fund, and hedge funds may invest a greater percentage of their assets in illiquid investments as compared to the Fund,” according to Unlimited.
However, HFGM does hedge because it holds both long and short positions, though that methodology doesn’t imply the ETF’s portfolio is overly exotic. It’s not. In fact, top holdings in HFGM are approachable to a broad swath of investors and include instruments such as bond, commodity, currency and equity futures as well as a pair of well-known fixed income ETFs.
Increasing the appeal of HFGM to advisors and investors is the correlation conundrum. In recent years, some asset classes have seen previously low correlations increase, meaning market participants weren’t getting the desired diversification when mixing those assets in portfolios. Alternative strategies such as HFGM typically sport noticeably lower correlations to equities and fixed income and could serve as enhancers to portfolios that lean heavily into stocks and bonds.
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