Latest news with #ETFs
Daily Mail
2 hours ago
- Business
- Daily Mail
InvestEngine review: How good is it for DIY investors and how does it compare to rivals?
Products featured in this article are independently selected by This is Money's specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. In our InvestEngine review, you can find out whether the investment platform is right for you. You'd be forgiven if you haven't heard of InvestEngine. It was founded in 2016 and launched its first portfolio in 2021, meaning it's a relative toddler when compared even with more adolescent investing platform rivals such as eToro and Trading 212. But InvestEngine* has rapidly gained popularity for its low fees and intuitive online platform, as well as its simplified range of investments. InvestEngine only offers Exchange Traded Funds (ETFs), which are investments that track the performance of specific markets or sectors, such as the UK's FTSE 100, or technology stocks. It also offers its own ready-made portfolios built with ETFs, as well as a managed option that's more personalised to you and your financial goals. If you're only looking to invest in ETFs rather than pick individual stocks and shares, InvestEngine is a great low-cost platform with a wide choice of investments available. More than 830 ETFs are available, allowing you to build a diversified set of investments. No account fees when choosing your own investments and low account fees when picking a ready-made or managed option. It's quick and straightforward to open an account. The process of buying investments is easier on other platforms. InvestEngine only accepts pension transfers from Vanguard currently. InvestEngine is a newer platform and as such some investors may prefer to open accounts with more established businesses. This is Money's view: We like InvestEngine's very low fees and its sole focus on ETFs. This makes it ideal for investors that want to build a diversified mix of investments quickly and with minimal fuss – beginners could do worse than open an account with InvestEngine. > Learn more about InvestEngine and open an account* You can open these accounts with InvestEngine: Isa General investment account Sipp Business account – for investing your business's cash > Read our full round-up of the best Sipp providers InvestEngine fees: Overview InvestEngine doesn't charge account fees for do-it-yourself investing. It also doesn't charge dealing fees. This puts it in competition with similar platforms like eToro, Prosper and Trading 212, which don't charge these fees either. You can read more in our Trading 212 review. Here's a breakdown: Do-it-yourself account fee: Free Ready-made LifePlan portfolios account fee: 0.25 per cent (LifePlan portfolios are temporarily unavailable while InvestEngine improves them) Managed portfolios account fee: 0.25 per cent (managed portfolios are also temporarily unavailable) There are underlying fees within the investments you hold, which cover their ongoing management and administration. You can check these on InvestEngine before buying. InvestEngine says the underlying fees for the investments within its ready-made and managed portfolios average 0.12 per cent. This is Money's view of InvestEngine's fees InvestEngine stands out as a great option for low-cost investing, with zero account fees for DIY investing. Only ETFs are available on the platform, which can help you keep ongoing investment costs low. As an example, compare two investments that both have a global outlook. The ongoing charges figure for the popular actively managed Fundsmith Equity fund is 1.04 per cent, while the ongoing charges figure for the Invesco FTSE All-World ETF is 0.15 per cent. Investments that simply track a market or sector can't outperform them by definition. But according to investment research provider MorningStar, only around 14 per cent of active managers have beaten passive strategies over the past decade, which helps explain why ETFs have grown in popularity. It seems a shame that InvestEngine's ready-made and managed portfolios aren't available at the moment, as account fees for these also relatively low in comparison with other providers. Managed providers Moneyfarm and Nutmeg charge 0.7 per cent and 0.75 per cent respectively. InvestEngine says it can keep fees low by generating interest on its clients' uninvested cash, as well as by charging account fees for both ready-made and managed portfolios. What is InvestEngine's investment choice like? How often does InvestEngine invest? InvestEngine only invests once a day. It combines all the orders placed before 2pm and then invests them in one go, which helps it keep costs down. This means those who try to time the market when buying and selling investments should look elsewhere. You can only buy ETFs using InvestEngine. ETFs have soared in popularity as a simple, low-cost way to track the performance of a market or sector and gain access to a diversified basket of investments. InvestEngine has more than 830 to choose from, with ETFs available that track asset classes including shares, bonds and commodities. This allows DIY investors to build a portfolio suited to their goals and risk tolerance. InvestEngine also offers ready-made LifePlan portfolios, each targeting different risk levels. These are like Vanguard's LifeStrategy funds, but they're temporarily unavailable while the platform improves them. ETFs are particularly well regarded by investors favouring a set-it-and-forget-it strategy, which involves investing with a lump sum or setting up a regular investing plan then leaving it, only occasionally checking performance. No doubt ETFs have also been buoyed by the strong performance of the US's S&P 500 over the last few years, with investors who want a piece of the action flocking to ETFs that track the index. What is InvestEngine's customer service like? You can only contact InvestEngine's customer service team by email, through an online contact form, or through social media. The platform says it can accommodate talking to customers over the phone, but you must request this by email first. The inability to access real-time customer support is a significant downside of newer, low-cost investment platforms. Investors effectively trade customer service options for reduced fees, so you should consider whether you'd prefer phone-based support. The good news is you can get in touch with InvestEngine's customer service team seven days of the week. This beats many other investing platforms whose teams are generally only available five or six days a week. Our view of InvestEngine's customer service Getting through to InvestEngine's customer service team is a protracted process. I tested this on the app, and unlike rivals such as Trading 212 and Interactive Investor, there isn't a chat function available. Instead, when you click 'help' you're taken to an FAQ page, which is extensive but unhelpful if you know you need to speak to someone. What's more, you'll only see 'contact us' after clicking the menu at the top of the screen. You then get a form that lets you submit your question or problem to the customer service team. In our view, it's best to get in touch with InvestEngine over email, at support@ – InvestEngine aims to reply within two business hours, which is positive. The nature of ETF investing means that customers may not need to speak to customer service as much as they would when buying shares or more complex investments. But if you do think you'll need extensive customer support, it may be best to look elsewhere. There's an active InvestEngine community forum where investors can ask for help, with InvestEngine staff and investors alike answering questions and helping with problems. What is InvestEngine like to use? InvestEngine is uncluttered. There aren't many bells and whistles, which we believe is positive in terms of InvestEngine's approach. Too many features can add complexity when picking investments and those investing solely using ETFs are likely seeking to simplify investing anyway. InvestEngine's platform looks the same on both desktop and mobile, so investors should get the same experience no matter what device they use. How did InvestEngine perform when opening an account and making an investment? After you sign up, InvestEngine gives you a useful tour and overview of its main dashboard and the accounts you can open. I opened a stocks and shares Isa using the desktop version of InvestEngine. This is quick, provided you have details such as your national insurance number to hand. To start investing, you must add a minimum of £100 to your account. When compared with other platforms this is relatively high – Trading 212 has a minimum £1 deposit, for example. It was quick to add a lump sum to the account through an instant bank transfer. The payment showed as pending for a short time before I was able to use the cash. Using it to buy an investment wasn't straightforward. First you must choose an ETF, which is simple enough – you just click 'investments' in the menu bar to begin your search. But you can't then place an order for the ETF directly. Instead, you must add it to its own portfolio first, move the cash into this portfolio, and then use the cash to buy the investment. This adds more steps than other platforms and can be time consuming, especially if you want to invest in a single ETF. However, a focus on building a basket of investments – your portfolio – can encourage positive behaviour, such as nudging investors towards thinking about diversification and asset allocation. InvestEngine allows you to set up a regular savings plan and automatic investments. What other features does InvestEngine offer? InvestEngine doesn't offer as many features as other platforms we've reviewed. If you like drilling down into detailed charts and reports or enjoy social trading features that allow you to interact with other investors, you should consider other platforms. However, we don't believe this is negative – it just depends on the type of investor you are. A no-frills approach fits InvestEngine's focus on simplicity. One feature that stands out is InvestEngine's rebalancing tool. This automatically brings your investments back to their target weights, buying underweight investments and selling overweight investments. You can also use the uninvested cash in your account to rebalance. But unlike a similar feature from Trading 212, you can't set up self-balancing automatic investments. This means your regular contributions buy investments at their target weights, which can lead to an unbalanced portfolio as investments rise and fall in value. It also has a useful reporting tool, easily accessible from the menu. You can create different types of reports, including a capital gains tax report, an account overview, and a valuation statement, covering many of the reasons you'll need to provide documents. What does rebalancing mean? You should think about your ideal mix of investments based on your goals and risk tolerance. Shares are generally considered riskier than bonds. So if you're a more cautious investor – and this is a simplified example – you might choose to build a portfolio consisting of 50 per cent shares and 50 per cent bonds. But the performance of your investments can skew this mix over time. If there's a runaway success within your shares allocation, your mix could end up more like 55/45 – and your investments are then riskier for you. Rebalancing would bring your mix of investments back to a 50/50 target. Is InvestEngine safe? In January 2025, InvestEngine confirmed that it manages over £1billion of assets for customers, so it's trusted with a significant amount of money. If InvestEngine went bust, the value of your investments would be protected up to £85,000 through the Financial Services Compensation Scheme (FSCS). InvestEngine is authorised and regulated by the Financial Conduct Authority (FCA). When setting up the InvestEngine app on your mobile device, it asks you to add a pin number, which you'll need to enter each time you open the app. Make sure this is different to your phone's pin number and you don't save the pin anywhere on your device, for example in your notes app. You can also set up a fingerprint log in. InvestEngine allows you to set up two-factor authentication, which is highly recommended as an extra layer of security. It requires you to authenticate a log in separately and can alert you when someone else is trying to access your account. What is InvestEngine's research and educational content like? InvestEngine partners with financial educators, planners, coaches and influencers to create educational content for YouTube. I found these videos more engaging and informative than similar offerings from other platforms. InvestEngine runs a blog that covers various topics, from investing in gold to pension fees and taxes. It also hosts regular webinars with investment management firms including Invesco, J.P. Morgan and WisdomTree. InvestEngine doesn't offer its own investment research. This is to be expected of newer, low-cost investment platforms – if you'd like detailed research to help you pick your own investments, it's worth exploring the likes of Hargreaves Lansdown and Interactive Investor. Guides and videos: InvestEngine features relevant content at the top of your main account page InvestEngine: This is Money's overall review InvestEngine* is backing the trend for low-cost investments that track markets rather than try to beat them. While ETFs are available on most other investment platforms, the fact that ETFs are the only type of product available on InvestEngine keeps investing simple. Other platforms such as eToro and Trading 212 were established as stock picking and trading platforms – these platforms may seem like they're actively encouraging you to trade regularly. InvestEngine suits investors who want to buy investments and simply forget about them. The fact InvestEngine only invests once a day discourages attempts to time the market. And a lack of detailed charts and graphs means that investors aren't enticed to log in multiple times a day and check investment performance – which can lead to poor decisions. But it's still relatively early days for InvestEngine. In our opinion one of the biggest question marks around the platform is it's making a loss, which has led investors to ask whether it'll always be able to offer zero or low account fees. In the meantime, those low fees and simplified investment choice make it a great platform for beginners who have already researched what ETFs to pick, taking their risk tolerance and ideal mix of investments into account. Why you can trust us This is Money has been covering investing and personal finance since 1999. Read more about how our editorial independence helps make our readers' lives richer. About our writer: As This is Money's Money and Consumer Guides Writer, Sam is dedicated to helping readers make the best decisions for their money. He's been covering financial products for more than 12 years and has written for NerdWallet, the Financial Ombudsman Service, Simply Business and Evelyn Partners. Sam regularly keeps track of the best stocks and shares Isas and self-invested personal pensions, explaining which investment platforms work out best for various investors. How we tested InvestEngine I've opened an InvestEngine stocks and shares Isa on a desktop computer and tested its features over several hours. I've also downloaded its app, testing how intuitive the platform is to use on mobile. I've bought investments and looked at InvestEngine's range of educational content. I've compared its fees and options for customer service with rivals, before giving my view on who the platform most suits. Compare the best DIY investing platforms Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you. When it comes to choosing a DIY investing platform, stocks & shares Isa, self invested personal pension, or a general investing account, the range of options might seem overwhelming. > This is Money's full guide to the best investing platforms Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. When weighing up the right one for you, it's important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs. We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide to the best investment accounts. Platforms featured below are independently selected by This is Money's specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. Admin charge Charges notes Fund dealing Standard share, trust, ETF dealing Regular investing Dividend reinvestment AJ Bell* 0.25% Max £3.50 per month for shares, trusts, ETFs. £1.50 £5 £1.50 £1.50 per deal More details Bestinvest 0.40% (0.2% for ready made portfolios) Account fee cut to 0.2% for ready made investments Free £4.95 Free for funds Free for income funds More details Charles Stanley Direct * 0.30% Min platform fee of £60, max of £600. £100 back in free trades per year £4 £10 Free for funds n/a More details Etoro* Free Stocks, investment trusts and ETFs. Limited Isa, no Sipp. Not available Free n/a n/a More details Fidelity * 0.35% on funds £7.50 per month up to £25,000 or 0.35% with regular savings plan. Free £7.50 Free funds £1.50 shares, trusts ETFs £1.50 More details Freetrade * Basic account free, Standard with Isa £5.99, Plus £11.99 Stocks, investment trusts and ETFs. No funds Free n/a n/a More details Hargreaves Lansdown * 0.45% Capped at £45 for shares, trusts, ETFs Free £11.95 Free Free More details Interactive Investor* £4.99 per month under £50k, £11.99 above, £10 extra for Sipp Free trade worth £3.99 per month (does not apply to £4.99 plan) £3.99 £3.99 Free £0.99 More details InvestEngine * Free Only ETFs. Managed service is 0.25% Not available Free Free Free More details iWeb Free £5 £5 n/a 2%, max £5 More details Trading 212* Free Stocks, investment trusts and ETFs. Not available Free n/a Free More details Vanguard Only Vanguard's own products 0.15% Only Vanguard funds Free Free only Vanguard ETFs Free n/a More details
Globe and Mail
5 hours ago
- Business
- Globe and Mail
Fidelity Investments Canada ULC Announces Cash Distributions for Certain Fidelity ETFs and ETF Series of Fidelity Mutual Funds
TORONTO, July 22, 2025 /CNW/ - Fidelity Investments Canada ULC today announced the July 2025 cash distributions for the Fidelity ETFs (" Fidelity ETFs") and ETF Series of Fidelity mutual funds (" Fidelity Funds") listed below.
Yahoo
12 hours ago
- Business
- Yahoo
Global ETF Industry Sees Record New Launches in H1 2025
As of the end of June, 1,308 new exchange-traded funds hit the global market in 2025 compared to just 878 during the same period last year, according to data from independent research and consultancy firm ETFGI. The record number exhibits just how appealing the low-cost, convenient wrapper is to investors. There were 266 closures of ETFs during the first half of 2025, resulting in a net increase of 1,042 ETFs. 'The rapid proliferation of new ETFs is a response to evolving investor preferences for cost-effective, transparent and flexible investment vehicles, coupled with ongoing innovation by asset managers to meet diverse investment needs and capitalize on market trends,' Deborah Fuhr, managing partner and founder of ETFGI, told 'The ETF market is highly competitive, and launching new products is a key strategy for providers to gain market share and attract inflows.' Global ETFs by the Numbers; iShares Leads So far in 2025, the United States has led the way in new ETF launches, with 481 new ETFs introduced, compared to 296 during the first half of last year and 205 during the first half of 2023. The Asia Pacific region (excluding Japan) came next with 399 new ETFs so far this year, while Europe had 198. BlackRock Inc.'s (BLK) iShares was responsible for 42 of the 1,308 new ETFs, followed by Global X with 36 launches and First Trust with 27. A total of 326 different providers debuted new ETFs during the first half of the year. The global ETF market also reached a record high in terms of assets invested, with $17 trillion at the end of June, surpassing the previous record of $16.3 trillion set in May. Year-to-date inflows totaled $897.7 billion, ETFGI found—another record high. Why ETF Issuance Is Surging Fuhr said there has been a surge in actively managed ETFs and that providers are launching thematic ETFs, such as those focused on industries like artificial intelligence or clean energy. Innovation in ETF structures, including those that use derivatives or provide exposure to digital assets, such as spot Bitcoin ETFs like the iShares Bitcoin Trust (IBIT), is expanding the range of options available, and funds that focus on specific factors like value, quality, momentum, size or minimum volatility are also gaining traction. She said asset managers are adapting to a noticeable shift in investor preference from mutual funds to ETFs by launching ETF versions of their existing mutual fund strategies, and a supportive regulatory environment in various regions is facilitating the growth and innovation within the ETF market.
Globe and Mail
12 hours ago
- Business
- Globe and Mail
Contra Guys: It can be advantageous to cast a wide – and global
How much of your portfolio is invested overseas? This is an important question, especially in a year such as this one, when many European stock indexes are beating North American benchmarks, including the S&P/TSX Composite Index. Though many Canadians are overweight in Canadian stocks, we remain true to our contrary roots and try to avoid home-country bias. Investing in our home market can have certain tax advantages, and avoids foreign exchange rate volatility, but it can also reduce diversification, increase risk and impact returns. Ultimately, it is a big world out there, and it can be advantageous to cast a wide net. This is why we make a habit of investing in exchange-traded funds and equities that do business around the globe. One such ETF is the Global X MSCI Greece ETF GREK-A, which tracks the performance of the MSCI All Greece Select 25/50 Index. Here at Contra the Heard Investment Newsletter, we took a stake in GREK in October, 2015. Back then, the Greek financial crisis was rumbling into its seventh year and few investors wanted to touch the country. The government had just negotiated its third bailout package, introduced capital controls and then-Prime Minister Alexis Tsipras had won a surprise re-election. These actions tempered the surging value of credit default swaps and yields on government debt, but the nation remained on the cusp of default. Gross domestic product had fallen from US$352.1-billion in 2008 to US$194.6-billion in 2015, the unemployment rate was around 25 per cent and the banking sector was on life support, as roughly 47 per cent of all loans were non-performing. To illustrate just how bad the Hellenic banking crisis was, during the peak of the 2008-09 U.S. financial crisis, America's non-performing loans were only 7.5 per cent. Amid these economic depression-like conditions, the Greek stock market sank to one of the cheapest in the world and we took a stake. Not only was it inexpensive, but we figured the Troika (a decision-making group composed of the European Commission, European Central Bank and International Monetary Fund) would not let Greece fail. The Troika had already bailed out the country three times and, within the context of the European Union, Greece was too big to fail. Once the ETF was in our portfolio, we practised patience. While corporate turnarounds take time, national ones can take even longer. In 2023, I wrote about the Greek ETF for The Globe and Mail. At the time, I argued the ETF was still cheap and the country was performing well thanks to a series of reforms that had cut the national debt, streamlined regulations, reduced tax avoidance, digitized government processes and put the banks back on their feet. Earlier: Greece's stock market is on a tear - and this ETF tracking it is poised for even more gains Fast forward to the present day and the turnaround has turned into a growth story. Greece regained an investment-grade credit rating in late 2023, the country's debt-to-GDP ratio has fallen from more than 200 per cent to 153.6 per cent and it produced a budgetary surplus of 1.3 per cent of GDP in 2024. By contrast, the euro zone average was a deficit of 3.1 per cent. The Greek government surplus is even more impressive given that most European countries have been spending just over 2 per cent of GDP on defence while Greece spent approximately 3.1 per cent last year. This should serve Greece well as the North Atlantic Treaty Organization alliance moves toward a new 5-per-cent target. Aside from government finances, the rest of Greece's economy is doing well too. The unemployment rate has fallen to under 8 per cent, the household-debt-to-GDP ratio has fallen from nearly 67 per cent to 39 per cent since the financial crisis and the financial sector's non-performing loan balance now stands at under 4 per cent. The banks have done so well that they now account for more than half of the GREK ETF versus around a quarter a decade ago. Despite all the success, Greece is not without risk. The debt-to-GDP ratio is still high, the nation continues to score poorly on the Corruption Perception Index despite recent advances and it has continuing problems with its neighbours in Turkey. The legal system is also a congested and inefficient mess. According to the EU Justice Scoreboard, it takes Greek courts over 600 days to conclude civil and commercial cases. By contrast, Denmark takes less than 20 days and most European countries take around 100 days. This means it can take years for a trial to reach a conclusion – assuming there is no appeal. These timelines slow down business, drive away foreign investment and leave parties impacted by court cases in a state of limbo. At its core, Greece faces poor demographics as well. The nation's fertility rate is roughly 1.3 births per woman, it suffered years of net emigration during the financial crisis and the median age, currently in the mid-40s, is climbing fast. This means that Greece's population, which peaked over a decade ago, is expected to fall in the decades ahead. Moreover, Greek society will get materially older; this will leave fewer working-age people to support retirees, health care infrastructure and pensions. All in all, however, Greece has more going for it than against it, and the turnaround over the past decade has been a resounding success. The outlook is positive and the GREK ETF could rally much further. We recently trimmed our position in GREK for a 109.2-per-cent gain. Locking in this profit recouped our initial investment but leaves plenty of skin in the game to benefit from future price appreciation. Today, GREK sports a yield of over 4 per cent and blends strong momentum with low stock valuations. These are excellent characteristics, especially when coupled with the underlying economic conditions. Our plan is to let the ETF run, look for valuations to increase further and sell the rest of our stake in slices. Once it is sold entirely, we will continue to avoid home-country bias, deploy the winnings in a new overseas investment and, with any luck, repeat the success. Philip MacKellar is the general manager at Contra the Heard Investment Newsletter.
CNBC
12 hours ago
- Business
- CNBC
Hedge funds are operating inside ETFs, with some big risks and potential benefits for investors
It's not exactly a new trend, but more hedge fund-like strategies continue to be launched as ETFs, promising investors returns uncorrelated to traditional stock and bond market indexes. For investors, the key is understanding the exact investing style of each (that can vary widely under a general "hedge fund" brand); how its differs from traditional stock and bond investments; how much it charges in fees, and whether there are equally good, and cheaper ways, to seek diversification in the market over the long-term. Historically, hedge fund strategies were limited to the ultrawealthy and institutional investors who could meet high investment minimums, but that has changed. There is now over $5 billion in assets under management in ETFs using some form of hedging and aiming for uncorrelated, diversified returns, according to data. These products are often classified as alternative absolute return strategies, offering investors an alternative to the stock or bond performance tracking the big market benchmarks, such as the S&P 500 Index and Bloomberg Aggregate Bond Index . Hedge fund ETFs can range from event-driven strategies, to multi-strategy portfolios and managed futures funds. The newest are from the Unlimited lineup up ETFs, founded by a former investment committee member at the world's biggest hedge fund, Bridgewater Associates. It recently launched global macro, long-short and managed futures strategies, all charging 0.95%. While no comparison can be made between what these funds are trying to do and the goal of an S&P 500 index fund like Vanguard's VOO , investors do pay a lot more for the access to alternative investment strategies. Vanguard's S&P 500 ETF has an expense ratio of 0.03%. Mike Akins, CEO of ETF Action, says that these strategies can be unique, and useful. "The idea of most of these strategies is you're going to get uncorrelated, diversified returns. So, you can get an absolute return strategy that's supposed to perform in all market cycles," he said. "You're creating kind of a diversification tool within your overall portfolio, the opportunity to generate solid returns, but in an uncorrelated fashion to your traditional equity and bond markets," he added. Funds that track major market benchmarks such as the Russell 1000 or S&P 500 should all have very similar performance, so choosing one of these ETFs versus another across all of the ETF managers that offer versions of them won't influence performance much, if at all. But with managed futures, event-driven or multi-strategy funds, Akins said there can be a huge divergence in returns across funds and over different time periods. He said a review of the recent performance from this category shows that some do produce negative correlations to the broad equity markets, but others purporting to achieve uncorrelated returns have extremely high correlations to major market benchmarks. "All these different strategies, even though they have very similar sounding names, the results and the way they're going about trying to achieve results are very, very different," Akins said. That leads Akins to conclude that in most cases, these kinds of ETFs are better left for professional investors to consider. "Generally speaking, they're probably best used in the hands of a financial professional that understands how they're putting it into a client's portfolio," he said. Strategas senior ETF and technical strategist Todd Sohn says that while the fees are higher than many core ETFs, accessing these strategies within a retail fund wrapper is the only way most investors can gain access to the more sophisticated trades. "Access is a pro, and then you're also getting what should be an uncorrelated strategy to your typical 60/40 stock and bond portfolio," he said. "It'll move in a different direction on a given day. It'll help offset, maybe, any losses." He added that while there are no guarantees it can lead to outperformance versus tradition portfolio structures, "ideally, it acts as a little bit of a push in certain environments." But Akins says that transparency is a factor, as these hedge fund-like structures can be hard for most investors to understand. "They're running very unique strategies. It really does become more of the due diligence of the manager selection process versus just understanding what's being done and held inside of the portfolio like a normal ETF or bond portfolio," Akins said. "The level of due diligence that needs to be done is much higher for this type of strategy," he said. Sohn said the complexities inherent in these funds is a factor that investors need to educate themselves on before including in a broader portfolio mix. "There's a little bit more nuance in them, and they can go long and short, they can play in very different asset classes, like commodities." Sohn said. "So there needs to be a little bit of an education component, and that complexity can sometimes scare people off," he said. Akins said it's fair to consider whether alternatives can take the place of traditional fixed income as a diversifier at a time when investors are concerned about the bond market's ability to serve in its traditional role, say up to 10% to 15% in an alternative bucket. "But if you're going to do that, you really, truly need to understand how it reacts," he said. "Is it truly providing you with uncorrelated returns? Is it making the overall risk in your portfolio decrease? Because if it's not, you're paying a lot," he added. The average expense ratio for the alternative ETF space tracked by is 92 basis points (0.92%), with some portfolios a bit below that but others well above 1%, even 2% in some cases, Akins said. "Unless it's truly delivering uncorrelated returns across the market, it's not worth the extra money," he said. He stressed that this does not mean alternative strategies are like some "Wild West" in the ETF market. "They're defined strategies. They're defined categories. But the way you go about implementing a managed future strategy, or the way you go about implementing a multi-strategy portfolio, putting all those different alts ... event-driven, managed futures, global macro [together], the way you go about doing that is very different for everybody," he said. Managed futures funds, for example, are all over the place in returns year-to-date, with some ETFs in the space up as much as 3% and others in the same category down more than 10%. "There's a reason those things have been kind of isolated to accredited investors or the wealthy," Akins said of the history of the hedge fund industry. It is not just the complexity of the strategies, but the fact that they serve a greater role in protecting existing wealth from market downside than growing wealth. For the average investor looking to grow their wealth over the long-term rather than protected the wealth already accumulated, these strategies often do not make as much sense, Akins said. Broad-based bond ETFs and low-volatility stock ETFs might be enough for most investors as a way to diversify risk over the long term in portfolios. "If I'm a 30-year-old looking to invest in the markets, and I just want I know it's going to be invested in my IRA or my taxable brokerage account for the next 30 years, these are not going to provide a benefit," he said. "For somebody with accumulated wealth, and the most important thing is to create a portfolio that protects the downside, then that's where these types of strategies really start to play a role in a portfolio. But it's not a YOLO [you only live once] type product," he said. Watch the video above to learn more about how hedge funds strategies are being replicated in ETFs. Sign up for our weekly newsletter that goes beyond the livestream, offering a closer look at the trends and figures shaping the ETF market. Disclaimer
