This article originally appeared in the June issue of Wealth Management Magazine and online at Brad Zigler
You know, with all the political mishegas at the end of 2016, I let some things slip. It took a shout out from an old acquaintance to remind me that I’d failed to publish the year-end scorecard of the best and worst in alternative investment ETFs.
Herein I offer recompense for my senior moment. In fact, I’ll even pay it forward a bit. We won’t just provide the 2016 recap, we’ll also score the field into 2017’s first quarter.
If you’ve seen our previous scorecards (“Alternative ETFs 2015 Scorecard,” and “The Best and the Worst in Alternative Investment ETFs,”) you know we look at the performance of single ETFs which we feel best represent each alternative asset class or strategy. We’re not grading every fund in each category, so we urge readers considering alternative investment ETFs to look at all offerings to determine their suitability.
Alternative investments are supposed to diversify overall portfolio risk by providing uncorrelated returns. Ideally, adding an alternative allocation to more traditional investment exposures enhances returns and reduces volatility. Keep that word “ideally” in mind. Investments are cyclical – favored at times, shunned at others. No investment is riskless.
In our previous annual recaps, we ranked each asset class or strategy by its yearly return. We’ve seen some dramatic turnarounds from one year to the next. In 2014, for example, the proxy for “Equity Market Neutral – Momentum” was at the bottom of the performance table, but topped the list in 2015. And in 2016? Back to the bottom again. Caveat emptor.
Last Year’s Rankings
We’ve made a few changes to the table since it was last published. First of all, we’ve added two strategies – “Equity Long/Short” and “Multifactor Equity” in recognition of the asset growth enjoyed by their representative ETFs. We’re also ordering the table by Sharpe ratio now, though we still show rank…