A Closer Look At The Burgeoning World Of Long/Short ETFs

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April 5, 2017 12:57pm NYSE:FTLS

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We have been peppering in coverage on several funds that fit the budding “Long/Short” category in the ETF landscape, including the largest in the space, FTLS (First Trust Long/Short Equity, Expense Ratio 1.17%, $111 million in AUM).


Our research has also led us to the $99 million HTUS (Hull Tactical Fund, Expense Ratio 1.00%) in the past several months. Today, we can expand on this segment a bit since there are now a total of eighteen different funds that fit here.

As one might expect, none of these strategies are created equal, and are offered by a variety of vendors. Moreover, not all of the strategies are “Equity-only,” as there are several that have a fixed income and or options focus.

There is a bit of a drop-off in terms of asset size after the two largest funds in the category as we see the $48 million fixed income strategy, RINF (ProShares 30 Year TIPS/TSY Spread, Expense Ratio 0.75%) ranking third, followed by RALS (ProShares RAFI Long/Short, Expense Ratio 0.95%, $39 million in AUM), DYLS (WisdomTree Dynamic Long/Short U.S. Equity, Expense Ratio 0.48%, $38 million in AUM), and HVPW (ALPS U.S. Equity High Volatility Put Write, Expense Ratio 0.95%, $31 million in AUM) to name a few.

RALS and DYLS, as their names suggest, are clearly equity based “Long/Short” strategies, while HVPW (which we have covered here on several occasions in the past) is options focused, and specifically in writing put options.

Further down the list of ETFs that are classified “Long/Short,” we see several esoteric niche strategies that have not quite caught on yet, such as FLAG (WeatherStorm Forensic Accounting Long-Short, Expense Ratio 0.92%, $13.5 million in AUM), LALT (PowerShares Multi-Strategy Alternative Portfolio, Expense Ratio 0.95%), FAAR (First Trust Alternative Absolute Return Strategy, Expense Ratio 0.95%), DYB (WisdomTree Dynamic Bearish U.S. Equity, Expense Ratio 0.48%, $3.8 million in AUM), GARD (RealityShares Divcon Dividend Guard, Expense Ratio 0.95%, $2.7 million in AUM) and DFND (Reality Shares Divcon Defender, Expense Ratio 0.95%, $2.4 million in AUM) for example.

An extension of “Actively Managed” ETFs, the Long/Short category will likely continue to expand in terms of fund offerings, strategies, and asset growth, and the key takeaway here is that each strategy should be vetted thoroughly before the ultimate investment decision is made.

FTLS-2017-04-05

The First Trust Long/Short Equity ETF (NYSE:FTLS) was trading at $34.89 per share on Wednesday afternoon, up $0.17 (+0.49%). Year-to-date, FTLS has gained 1.13%, versus a 6.04% rise in the benchmark S&P 500 index during the same period.

FTLS currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 23 ETFs in the Long Short ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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