Opportunities with ‘bear’ and ‘hybrid’ ETFs

How effective are bear funds?

If you think markets are prone to falls or feel the need to hedge your portfolio, you don’t necessarily have to sell your holdings to defend against a market downturn. ‘Bear’ funds which trade on the ASX offer a way to hedge portfolios.

Benefits of this may include:

  • The ability to hedge the portfolios without selling shares and crystalising Capital Gains Tax events.
  • Maintaining exposure to dividend income and franking credits, which is not achieved when moving to cash.
  • Reducing market risk without tinkering with carefully selected stock portfolios.

(Click on the cover page image for the full document).

A better way to invest in hybrids

Navigating hybrids

Due to their attractive income, franking credits and relative capital stability, Australian investors are drawn to hybrids, with the local market now over $55 billion.

However, some investors don’t appreciate that they come with risks and complexities and require vigilant oversight. Most investors simply buy and hold hybrids, few seek mispricing opportunities or consider the individual risk profile of each security. This presents an opportunity for specialist active managers. Key points include:

• The terms of hybrids can be complex and varied, making analysis difficult
• Investors may underestimate or not be aware of the risks involved in owning hybrids directly
• An active approach to managing hybrids can potentially reduce portfolio risk, and seek to take advantage of market mispricing to deliver outperformance

BetaShares recently launched HBRD, the first active ETF in Australia providing access to a professionally managed, diversified portfolio of hybrid securities.


Sponsor White Papers (click here to see all previous papers)

Wikipedia defines a White Paper as “an authoritative report or guide informing in a concise manner about a complex issue and presenting the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.”

Print Friendly, PDF & Email
No comments yet.

Leave a Comment:

This site uses Akismet to reduce spam. Learn how your comment data is processed.