Piling into stocks that are heavily shorted hasn’t been a winning strategy for active ETFs, according to new research from Bloomberg Intelligence. The analysis sorted active ETFs based on how much of their US stock holdings were invested in heavily shorted names and re-ranked them twice a week. Over nearly five years, $1 invested in the most-exposed group grew to just $1.06, compared to $1.65 for funds with the least exposure to shorted stocks. The issue wasn’t that high-exposure funds couldn’t rally—the cohort surged 110% from their 2022 lows, and at times even beat peers that steered clear of crowded shorts. The problem was the drawdown: those funds took bigger hits in 2022, leaving them with a much longer climb back up. Individual managers were mostly responsible for buying shares of shorted companies. The four stocks with the most buying relative to their short positions—Ubiquiti, Alamar, Stagwell and Maplebear (which does business as Instacart)—were each bought almost entirely by a single fund family. A stock getting love from just one fund family is less likely to turn into a broad-based squeeze.
A separate trend involves so-called “dividend nomads”—people funding a life of travel through investment income and a low cost of living abroad. They gravitate toward ETFs that use options and derivatives to generate regular cash payouts. Assets in derivative-income funds have quadrupled over the past three years to more than $270 billion as online influencers promote them as a shortcut to financial freedom. But many charge fees of 1% or more annually, and those eye-catching yields don’t necessarily translate into equally impressive total returns.
Take Jae Hyouk Jang, 43, who traveled through Thailand, Vietnam and Laos, living off about $130,000 in savings and high-octane investment strategies. Then there’s Dave and Mor Vanderhoef, who live in Portugal with more than $500,000 saved. They rely on about $70,000 invested in ETFs like the JPMorgan Equity Premium Income ETF (JEPI), generating roughly $700 a month—covering as much as half of their monthly expenses. While the dividend-nomad life may be possible, it isn’t without risks.
উৎস: Bloomberg Markets · সারাংশ: HeadlinesBriefing