While many Australian equity funds are suffering, two ETFs are managing to achieve strong gains as a result of their short positioning.
The BetaShares Australian Equities Bear Hedge (BEAR) fund and the Australian Equities Strong Bear Hedge (BBOZ) have returned 29.7% and 72.9% since the start of 2020 to 19 March, according to FE Analytics, versus losses by the ASX 200 of 27%.
The short equity funds were negatively correlated to the Australian stockmarket and positioned to rise when markets were falling and vice versa. If the stockmarket falls by 1%, the BEAR fund would return 0.9%-1.1% while the BBOZ fund would return 2%-2.75%.
Alex Vynokur, chief executive of BetaShares, said: “Advisers see this as a form of insurance policy, a way they can protect against equity losses. The funds allow them to maintain equity exposure but hedge the risk of fall in value in a time of significant market volatility.
“The clients most vulnerable to this volatility are retirees and pre-retirees because they are reliant on their portfolio to provide them income in retirement. If the market falls significantly then they will likely need to sell part of their portfolio which creates a permanent loss of...