HDGE Gathers Steam Despite High Fees


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What Is HDGE?

Don't lump this fund in with other hedge-fund-style ETFs. Instead, think of the word "hedge" implied by the fund's ticker in the context of directly hedging equity exposure that you have elsewhere in your portfolio.

From a performance point of view, the AdvisorShares Active Bear (NYSEArca:HDGE) is an actively managed inverse equity fund. One look at the chart below showing HDGE's returns against the SPDR S&P 500 (NYSEArca:SPY) confirms this.

HDGE currently outpaces its 1x inverse equity competitors in terms of one-year returns as the table below shows. (HDGE's peers are the ProShares Short S&P 500 (NYSEArca:SH), the ProShares Short Russell 2000 (NYSEArca:RWM), the ProShares Short Dow30 (NYSEArca:DOG) and the ProShares Short QQQ (NYSEArca:PSQ)).

I wonder why. Are they betting on outperformance from the fund's managers, along the lines of Prudent Bear mutual funds and others? Or are they skirting the "inverse" label that applies to HDGE's peers? Inverse funds are disallowed from some portfolios or barred from some advisors' platforms. HDGE avoids the letter if not the spirit of any rules-based ban on "inverse" funds exposure in a portfolio.

Taking a step back, the case for hedging equity exposure in a portfolio in these uncertain times-using any of these funds-can make sense. For this purpose, the simple solution is to match the inverse fund to your equity position. If you're long in QQQ, for example, then PSQ is the way to hedge.

Whatever the reason, HDGE has undeniably attracted major investor interest. If you want in, just be clear on what this fund is:a well-established, actively managed, unlevered U.S. equity inverse fund with a high fee and decent net performance results.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs
More Headlines for: DOG , PSQ , RWM , SH , SPY

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