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Coronavirus Versus Market Beta

Mar. 02, 2020 6:08 AM ETIWF, GLD, TLT, DLBR, BTAL, MOM, FUT, WTMF
Brad Zigler profile picture
Brad Zigler


  • For any portfolio addition to be considered a risk reducer, the resultant diversification ratio must be greater than 1.21.
  • There's a wide gap separating those earned by managed futures and those generated by other alts.
  • In the end, with beta's hegemony now challenged, alts may be given a second look by investors and advisors.

It's times like these that test investors' resolve - and why alternative strategies were created. So how did alts do over the last week of February as the broader markets were getting their teeth kicked in?

Recently, investors discovered the true meaning of an idea going viral. Fear of the coronavirus sparked a stampede to safe havens in the last week of February as new worldwide infections cropped up.

Investors holding Treasury paper and gold managed to soften the resultant blow to the equity side of their portfolios. Fixed income investments and bullion are touted as hedges because they're not well-correlated to equities. Non-correlation is also the raison d'être of alternative investments, or "alts," but in the recent beta-is-everything era, alts fell by the wayside, kicked to the curb by large-cap growth stocks.

It was big stocks that took it in the teeth in late February, though, as threats to global supply chains grew. The $50 billion iShares Russell 1000 Growth ETF (IWF), for example, shed more than 8.5 percent of its market value in the week ending February 26. Gold, proxied by the SPDR Gold Shares Trust (GLD), rose 1.4 percent while the value of the iShares 20+ Year Treasury Bond ETF (TLT) was yanked up 3.2 percent.

And alts? How'd they do? Well, that depends on which alt investment you held. Alts are not monolithic. There are long-short portfolios, currency plays and managed futures funds, to name but a few segments.

A diverse mix of five alts ETFs turned in positive results during the February equity selloff.

Topping the list with an 11 percent weekly gain was the VelocityShares Short LIBOR ETN (DLBR), a variably leveraged product that simulates a bearish bet on the U.S. dollar-denominated 3-month London Interbank Offered Rate. The note's methodology derives an implied yield from a

This article was written by

Brad Zigler profile picture
Brad Zigler's stints as a contributing editor for the Corporate Communications Broadcast Network, the Journal of Indexes, and CRB Trader set the stage for his role as managing editor of Hard Assets Investor and later as alternative investments editor of Wealth Management (formerly Registered Rep.) magazine, the most highly subscribed publication for financial advisors. Brad's feature articles have appeared in Registered Rep./Wealth Management, Mutual Funds, Financial Planning, Financial Advisor, Futures and Ticker magazines, TheStreet.Com and MarketWatch Web sites, and in journals published by Institutional Investor. After heading up marketing, research and education at the Pacific Exchange's (now NYSE Arca's) option marketplace and Barclays Global Investors, Brad became a financial correspondent for the European Press Network, and a Public Broadcasting System/National Public Radio affiliate. He continues his work as a financial research and communications consultant for a number of private and public organizations.

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Related Stocks

SymbolLast Price% Chg
iShares Russell 1000 Growth ETF
SPDR® Gold Shares ETF
iShares 20+ Year Treasury Bond ETF
VelocityShares Short LIBOR ETNs
AGF U.S. Market Neutral Anti-Beta Fund ETF

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