The Rise of Hedge Fund Strategies in Mainstream Investing: Introduction of a New ‘Opportunistic’ ETF

The line between hedge funds and retail investors has been blurring in recent years, with the launch of a new ETF further bridging this gap. The Opportunistic Trader ETF, trading under the ticker “WZRD,” debuted and quickly amassed over $15 million in assets. Run by Larry Benedict, a former hedge fund manager featured in the “Market Wizards” series by Jack Schwager, the fund promises to bring hedge fund strategies to smaller investors.

Benedict’s fund will utilize many of the same strategies, including equity options, that he previously used when managing billions of dollars. The expense ratio of 0.99% for WZRD may seem steep compared to passive index funds, but it is still more affordable than traditional hedge funds. With the belief that smaller investors are willing to pay for access to previously exclusive strategies, Benedict and others in the industry are optimistic about the future of hedge-fund like ETFs.

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The WZRD ETF will not follow the typical buy and hold strategy associated with ETFs. Instead, it will actively trade equities, other ETFs, and options, often holding positions for only a week. This shift towards more active funds is reflective of a broader trend in the ETF industry, with active funds gaining momentum in recent years.

The rise of active funds can also be attributed to regulatory changes, such as a 2019 SEC rule that made operating an active ETF easier. Technological advancements have also played a role in enabling more complex trading strategies within ETFs, as noted by Opportunistic Trader COO James Hickey.

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Currently, the top holdings in WZRD include popular ETFs like SPDR S & P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ), as well as individual stocks like Nvidia and JPMorgan Chase. Benedict highlighted technology as a key area of focus due to its strong momentum and volatility.

While active managers with proven track records can provide value, it is important for investors to carefully consider the fees associated with these strategies. Despite the challenges, the growth of hedge-fund like ETFs signals a shift towards more accessible and dynamic investment opportunities for retail investors.

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