Thursday, March 10, 2011

The most expensive ETF out there: Actively managed bear HDGE

Interesting reading material and an interesting ETF to follow on performance, say - 2 years from now. The bigger question is, if a fund relies on the star quality of it's manager (actively managed) - then aren't you betting on the manager's continued employment? Hmmm....

AdvisorShares Debuts Active Bear ETF (HDGE)
AdvisorShares, the Maryland-based issuer behind many of the most popular active ETFs on the market, is expanding its product lineup. Today marks the debut of the Active Bear ETF (HDGE), a fund that seeks capital appreciation through short sales of U.S. stocks. The fund is sub-advised by Ranger Alternative Management, and the management team will employ a bottom-up, fundamental, research-driven security selection process.

Forensic accounting will be at the heart of the new ETF. In identifying securities to short, the fund managers will seek out those with low earnings quality or aggressive accounting that may be intended to mask operational deterioration and boost reported earnings in the short term. The managers will also seek to identify earnings-driven events that may trigger a price decline, such as downward earnings revisions or reduced forward guidance. According to the fund’s investment objective and methodology, potential warning signs are ranked in proportion to where they are located on the income statement–the higher up, the greater the cause for concern. Among the elements of reported financials that may be analyzed are revenue recognition policies, changes in inventory and reserves, and charges for restructuring and other non-recurring events.



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