An ETF For Conservative Allocators

Depending on one's point of view, “conservative” may be a dirty word since 2016 is an election year, but with the way equity markets have been behaving to start the year, conservative is the way to be.

That is a posture that can be established with any number of exchange traded funds, including low volatility products. Another avenue for being conservative is with conservative allocation ETFs, such as the actively managed WBI Tactical Income Shares WBII. WBII, which debuted in August 2014, is designed to participate in a significant portion of a bull market while providing investors with plenty of protection during market downturns.

The ETF is doing a fine job of that. As of Feb. 11, WBII was up just over one percent on a year-to-date basis compared to a 10.3 percent loss for the S&P 500.

“WBII is the top-ranked fund in the Morningstar Conservative Allocation category. WBII returned +1.10% versus the category loss of -2.43% and the category benchmark, the Morningstar Moderate Target Risk, loss of -5.82% year-to-date. Over the trailing one-year, WBII outperformed the benchmark by +7.72%. The fund was able to tame the bear during this significant market dislocation through a conservative positioning, aiming for safety of capital,” according to New Jersey-based WBI Shares, WBI's issuer. 

WBII's top 10 holdings are reflective of what is working in the current market environment, meaning plenty the ETFs holds plenty of other ETFs that offer exposure to U.S. government debt of varying durations. WBII's top 10 holdings include well-known fixed income funds, such as the iShares 20+ Year Treasury Bond ETF TLT, iShares 7-10 Year Treasury Bond ETF IEF and the iShares Core U.S. Aggregate Bond ETF AGG.

The heavy tilt towards U.S. Treasurys reduces WBII's volatility and correlation to other assets. As of the end of 2015, the ETF's one-year standard deviation was just 4.2 percent compared to a three-year standard deviation of nearly 11 percent for the S&P 500. WBII can also hold common stock in U.S. and developed markets companies.

“ WBII was the 14^th largest actively managed ETF available as of 12/31/2015, and continues to grow through strong performance and inflows. WBII also offers exceptional liquidity deriving from an average trading volume of 32 thousand shares daily. WBII seeks to provide investors with a wealth-building investment strategy that provides low volatility, low correlation, and an optimal blend of bear market capital preservation and bull market return,” said WBI Shares.