COVID-19 Coronavirus Forces Investors To Look For Yield, Safety

With volatility at historically high levels and the COVID-19 coronavirus testing the limits of the entire global financial system, investors have been sent on a hunt for yield and safety.

Since the late February highs in broad market indices, drawdowns in some passive funds have reached levels as high as 30%. According to Bloomberg data, the SPDR S&P 500 ETF saw investors withdraw more than $6.5 billion in a session, the most since October 2018.

A question now arises; where do investors go?

Cognizant of the extreme volatility and failure of broad-market investment vehicles to outperform in times of uncertainty, AdvisorShares Investments, a U.S.-based investment management firm founded in 2006, claims to have the solution: actively managed ETFs.

“All of our ETFs have portfolio managers who are making decisions based on different strategies that they run, trying to outperform either on an absolute or risk-adjusted basis, some passive underlying benchmark,” AdvisorShares CEO Noah Hamman told Benzinga.

According to Hamman, investors get access to outperforming investment vehicles whose liquidity, expenses, and transparency allow for efficient and diversified exposure in international and domestic assets.

Hamman told Benzinga that the recent downturn brought massive interest to the firm’s two all-short funds, Dorsey Wright Short Equity ETF DWSH and Ranger Equity Bear ETF HDGE.

“They’re actively managed, so they are not broadly shorting the good stocks, along with the bad,” he said.

“We’ve seen the most amount of flows at the beginning of the year, and then, certainly over the past two weeks,” added Hamman.

In Hamman’s view, the future of investing is one that includes both passive and active management; this note comes alongside comments made by successful fund managers like Michael Burry, who became famous for betting against mortgage securities.

According to Burry, the preconditions for central bank backstops are no longer valid and that the large inflows which caused index funds to distort stock and bond prices will turn into large outflows.

“I have had a significant bearish market bet that is working out for now,” Burry told Bloomberg. “A global pandemic is absolutely a potential trigger for the unwinding of the passive investing bubble. With Covid-19, the hysteria appears to me worse than the reality, but after the stampede, it won’t matter.”

AdvisorShares thinks it has the answer with it’s blended and pureplay thematic, microcap, cannabis, equity and fixed income investment strategies. Hamman noted that sheltering investors from the storm is a top priority with its systematic, built-in hedges that withstand extreme market volatility, such as the market crash of 2020.

“We use the iTunes analogy; I want to be able to get [managers] within your playlists -- your portfolio -- that are good, unique, not mainstream and accessible from a hundred other places.”