For example, hedge funds have for a long time employed momentum strategies, where they will identify a strong price trend in a particular asset class, jump on it and reap the benefits until the trend fades or reverses direction.
ETFs have now made it relatively straightforward for managers to offer institutional and retail investors a pure momentum multi-asset strategy via a Ucits or non-Ucits retail scheme structure.
The availability of inverse ETFs allows this approach to be used in its purest form, achieving positive returns by following strongly negative price trends, as well as positive ones.
What this demonstrates is that inverse ETFs can be a very useful addition to the multi-asset manager’s toolbox. The investment community certainly seems to be waking up to their potential.
Stacey Ash is an investment manager at iFunds Asset Management
