“The focus on upside opportunity with risk management is really the why for the active-based ETFs.” – 03:07
Remy Blaire engages in a thought-provoking discussion with Alexander Flecker, the Chief Revenue Officer at Measured Risk Portfolios. The conversation centers around the current state of market volatility and its implications for investment strategies, particularly focusing on actively managed ETFs and options-based ETFs.
Remy begins by highlighting the resilience of U.S. equities, noting that despite significant market fluctuations, the S&P 500 has seen a year-to-date increase of approximately 15%. Alexander elaborates on the importance of maintaining long-term compounding returns while also emphasizing risk mitigation strategies. He points out that the CAPE ratio is at its highest level since 1999, which has led to hesitancy among individual investors regarding their market participation.
The discussion shifts to the growing trend of active professional management within the ETF space. Alexander explains that while active ETFs currently represent only 8.5% of the total market share, they have captured about 30% of net fund flows year over year. He highlights options-based ETFs as a particularly popular strategy, offering tailored risk-reward profiles and leverage opportunities that cater to individual investors’ specific risk tolerances.
Remy and Alexander also explore the appeal of short-duration U.S. Treasuries as a risk-free asset class. Alexander emphasizes that in the MRP Synthequity ETF, a significant portion of assets is allocated to these Treasuries, providing principal stability and allowing investors to feel secure while still pursuing growth through a 15% allocation of call options that replicate S&P 500 performance.
Throughout the episode, they discuss the diverse range of investors interested in the Synthequity ETF, from retirees seeking to maintain growth to younger investors with immediate liquidity needs. Alexander shares key takeaways from the rapid growth of this strategy, underscoring the demand for dynamic, active management that can adapt to changing market conditions.
As the conversation draws to a close, Remy and Alexander address the importance of managing downside risk, especially with an upcoming critical earnings season and potential economic shifts. Alexander stresses the need for vigilance regarding corporate earnings, geopolitical risks, and Federal Reserve policy changes.