Displaying items by tag: ETFs

State Street launched a new fund LQIG which started trading on May 12, an effort to give investors exposure to liquid bonds with high traceability. The market is rife with turmoil, and investors are looking to different fixed-income products to provide an inflation-beating yield and relatively liquid assets. The fund seeks exposure to 400 investment-grade corporate bonds denominated in dollars. These differ from most fixed-income funds which are designed to give broader market exposure that doesn’t prioritize traceability. The high traceability comes with lower bid-ask spreads as well as more transparency into their holding's real-time valuations.

Finsum: Investment-grade corporate debt is looking relatively more attractive with market volatility at such highs.

Volatility ETFs reached infamy in the 2018 Volmageddon episode, but these formerly destructive ETFs making a Lazzarath-like comeback. Both the SVIX and UVIX delivered record style gains amid inflows due to market gyrations UVIX closed 37% higher but was up 42% in mid-day trading. The wild up and downs came in response to the Fed meeting and a tanking S&P the following day. Advisors are steering investors toward both UVIX and SVIX because this is exactly where these products thrive. However, there is still a substantial risk as investors have suffered greatly in the past from these products and the ‘juice’ they are receiving could be detrimental on the downside.

Finsum: This is unprecedented volatility in the post-GFC, and it could continue until inflation is under control.

Direct Indexing is being heralded as the next big wave of investment products, as it gives investors the power to take advantage of tax-loss harvesting and customize it to their interests. However, the dual objectives that they propose could come to compete with each other and undermine investor interests. If investors maximize the tax-alpha they aren’t really aligned with their interests which younger investors are holding as a high priority. Riding a portfolio of all ‘greenwashers’ gives investors few options for tax purposes and deviates too far from the underlying index. The most effective solution might be for financial advisors to develop a better understanding of client interests rather than leaning on a magical new product.

Finsum: Some are calling direct indexing active management in disguise, but investors trying to capitalize on either customization or tax loss might still find it an attractive option.

There has been a mass exodus in the corporate bond market which is making fixed-income funds as attractive as they have been in a while. Outflows started 21 weeks ago and are hitting $28 billion according to Refinitiv Lipper. With investors fleeing this has created even more negative returns on top of inflation and interest rate pressure. Investors willing to hold bonds to completion, particularly in value sectors like banking are getting them at an ultra bargain. One reason we are seeing investors flee corporate bonds is yields have been climbing faster than treasuries but many see interest rate risk already priced in which could be enough to turn around the investment-grade bond market.

Finsum: Value sector bond ETFs could be a smart play, with commodities and financials being major players. 

The bond market has given investors pause, and the international bond market especially so. While continuing Covid-19, international war, and rising rates may scare investors, international bonds still add enough diversification to justify their place in the portfolio. Investors are more worried about inflation/interest rates now than Ukraine and Russia, and that risk is heightened domestically. As the Fed hikes rates, yields will rise and hurt domestic bond and equity portfolios. The Euro area has significantly less interest and inflation risk in the near term. Additionally, the deglobalization of covid is slowly going away, and as markets open up that will only improve the position of international bonds.

Finsum: ETFs with large exposure are best in international markets because tensions surrounding global issues are heightened right now.