Hedged ETFs

Do they add value?

Authors

  • Srinidhi Kanuri Department of Finance Real Estate and Business Law, College of Business, The University of Southern Mississippi

DOI:

https://doi.org/10.61190/fsr.v25i2.3220

Keywords:

Hedge funds;, Investments, Exchange Traded Funds (ETFs), Index fund ETFs

Abstract

Hedged Exchange Traded Funds (ETFs) provide individual investors with the opportunity to invest in ETFs that follow strategies similar to those of hedge funds and seek returns uncorrelated with the market. In this article I analyze the performance of six different categories of 49 Hedged ETFs and 539 Hedged Mutual from January 2008 to December 2014, and compared them with five different asset categories of index ETFs. Hedged ETFs and Mutual Funds had highly negative or low correlation with other index ETFs which indicates that they did help investors diversify. Hedged ETFs also had much lower risk compared with other index ETFs with the exception of bond market ETF AGG. However, this did not translate into superior absolute or risk-adjusted performance, and Hedged ETFs underperformed all other asset categories (with the exception of Commodities ETF DBC). The absolute- and risk-adjusted performance of Hedged Mutual Funds was similar to that of Hedged ETFs. Based on these findings investors would have been better off with index fund ETFs.

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Published

2016-06-30

How to Cite

Kanuri, S. (2016). Hedged ETFs: Do they add value?. Financial Services Review, 25(2), 181–198. https://doi.org/10.61190/fsr.v25i2.3220

Issue

Vol. 25 No. 2 (2016): Summer 2016

Section

New Original Submission

License

Copyright (c) 2014 Academy of Financial Services

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