Global X Funds, the New York fund provider known for its niche
strategies, filed paperwork with U.S. regulators to market a
broadly diversified ETF that promises capital appreciation through
a risk-focused asset allocation strategy.
The Global X Risk Parity ETF will invest in everything from
equities to bonds to commodities and derivatives, but it will
determine those allocations based on risk measures-such as
volatility-as it seeks to increase its value while mitigating risk.
No ticker or fees were disclosed.
The fund will employ what Global X called a "risk parity
approach" to asset allocation, meaning it will underweight the
riskier assets-such as global and emerging market equities-and
overweight lower-risk segments, such as global fixed income and
inflation-linked government bonds, it said in the filing.
Asset allocation ETFs often turn to broadly diversified exposure
schemes to capture growth and income in the long run. Such
strategies are attractive to more risk-averse investors and have
gained favor in the aftermath of the 2008 credit crisis that sent
equities market into a tailspin and the economy into a deep
Global X is hoping to join other fund providers, such as
Wheaton, Ill.-based Invesco PowerShares and San Francisco-based
iShares, that have already tapped into the space. The fund-of-funds
PowerShares RiverFront Tactical Growth and Income Portfolio
(NYSEArca:PCA) is one of the older funds in the category, while
iShares' roster of asset allocation strategies offer more nuanced
plays based on an investor's risk profile.
They include the iShares S&P Aggressive Allocation ETF
(NYSEArca:AOA), the iShares S&P Conservative Allocation ETF
(NYSEArca:AOK) and the iShares S&P Growth Allocation ETF
AOR is the biggest of the three, with $137 million in assets,
and has returned 4.6 percent year-to-date, according to Google
Finance data. By contrast, AOA's more aggressive take has climbed
6.68 percent during the same period, while AOK only gained 1.84
Playing With Leverage
The new ETF will track the multi-asset-class FXcube Risk Parity
Index, which includes currencies and real estate. It covers markets
in emerging as well as developed markets.
The fund might also have leveraged exposure to some of these
In fact, as much as 20 percent of the portfolio might be
allocated to derivatives such as futures contracts, options, swaps
and cash equivalents, the filing said.
"Leveraging tends to magnify, sometimes significantly, the
effect of any increase or decrease in the fund's exposure to an
asset class and may cause the fund's net asset value to be
volatile," the company said in the filing.
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