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5 Long/Short ETFs to Bypass a Volatile Market

With volatility being the catchword now in the broader equity market, investors might be clueless about the future movement and apprehensive of sell-offs lurking ahead. This is truer given the awaited outcome of the September 26–28 meeting among major oil producers over the output freeze issue, the presidential debates prior to the U.S. election and the uncertainty over the timeline of the Fed rate hike (read: Prepare for a Trump Presidency With These Stocks & ETFs).

Most importantly, the U.S. economy recently has lost momentum as evident from some downbeat data points in the fields of job, manufacturing and retail released for the month of August. Along with economic slowdown, soft corporate earnings continue to scare investors. Growth issues are still rampant in the developed markets (read: Fed Plays Safe As Expected, Outlook Positive: ETFs to Buy).

Yes, yet another dovish Fed meeting and an accommodative Bank of Japan offered some relief to the global market last week, but these were not enough for sustained gains. As a result, equities continued to seesaw.

All in all, it hasn’t been a very good time to invest in equity markets. Most global benchmarks were in the red on September 23, 2016. The S&P 500-based SPY was down 0.6%, Dow Jones Industrial Average-based DIA slid about 0.7%, iShares MSCI Emerging Markets ETF EEM slipped about 1.3%, Vanguard FTSE Europe ETF VGK fell 0.8%, iShares MSCI Japan ETF EWJ shed about 1.4% and all-world ETF iShares MSCI ACWI ACWI retreated about 0.7% (read: Hedge Your Portfolio Against Sell-Off With These ETFs).

To bypass the expected equity market weakness, investors may rev up their exposure to long/short ETFs. Below we highlight a few of these that may beat the recent blues in the market.

X-Links Long/Short Equity ETN CSLS

The index is designed to correlate to the historical performance of the Credit Suisse Long/Short Equity Hedge Fund Index. It gives exposure to a long/short equity strategy as indicated by long and short positions in various market measures. The product added about 1.2% on September 23, 2016 (read: After Goldman, DB Warns About S&P 500: Play Alternative ETFs).

30 Year TIPS/TSY Spread ETF RINF

The product tracks the performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index. The index tracks the performance of long positions in the most recently issued 30-year TIPS bond & duration-adjusted short positions in US Treasury bonds of the closest maturity.

The difference in yield between these bonds is commonly referred to as a breakeven rate of inflation and is considered to be a measure of market expectations for inflation over a specified period of time. The fund was up about 0.7% on September 23, 2016.

U.S. Market Neutral Anti-Beta Fund BTAL

Investors who want to shift their focus to investing in low beta stocks during this uncertain market environment can consider adding BTAL ETF to their portfolio. This fund tracks the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index which is an equal weighted, dollar neutral, sector neutral benchmark. The index identifies the lowest beta stocks and goes long on them, while at the same time goes short on the highest beta stocks. The fund added over 0.6% on September 23, 2016.


The fund tracks the RAFI US Equity Long/Short Index, which provides equal allocation to both long and short equity positions. The fund added about 0.3% on September 23.

US Equity High Volatility Put Write Index Fund HVPW

The fund looks to track the NYSE Arca U.S. Equity High Volatility Put Write Index. The index takes advantage of stocks with the highest volatility in the U.S. equity markets, regardless of overall market volatility. As the volatility in a given stock increases, so does the price of the options traded on it. The index seeks to generate income by selling put options on the most volatile stocks in a period of two months along with interest earned on T-bills. The fund advanced about 0.2% on September 23.

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SPDR-SP 500 TR (SPY): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
ISHARS-EMG MKT (EEM): ETF Research Reports
US EQ HI VPWIF (HVPW): ETF Research Reports
ISHRS-MSCI ACWI (ACWI): ETF Research Reports
CS-LONG/SHORT (CSLS): ETF Research Reports
QS-US MN AN-BET (BTAL): ETF Research Reports
PRO-SH INFL EXP (RINF): ETF Research Reports
VANGD-FTSE EUR (VGK): ETF Research Reports
PRO-RAFI L/S (RALS): ETF Research Reports
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