Last year's volatility tested smart-beta ETFs such as Hartford Funds' multi-factor ETF suite. But Ted Lucas, head of investment strategies and solutions, says the products performed well relative to peers thanks to their emphasis on diversification and risk reduction compared with cap-weighted index strategies. The firm saw its best sales to date during the choppy fourth quarter.
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The views and opinions expressed herein should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security.
Reference made to performance of the strategies is based upon how the products performed relative to peers in the fourth quarter of 2018. Past performance is not a guarantee of future results. Click here for standardized performance.
Investing involves risk, including the possible loss of principal. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. The multifactor ETFs are not actively managed but rather attempt to track the performance of an index. The returns of multifactor ETFs may diverge from that of the index. Diversification does not eliminate the risk of loss.
ETFs are not mutual funds. Unlike traditional open-ended mutual funds, ETF shares are bought and sold in the secondary market through a stockbroker. ETFs trade on major stock exchanges and their prices will fluctuate throughout the day. Both ETFs and mutual funds are subject to risk and volatility.
Raw beta, also known as historical beta, is based on the observed relationship between the security's return and the returns of an index. Alpha is the measure of the performance of a portfolio after adjusting for risk. Alpha is calculated by comparing the volatility of the portfolio and comparing it to some benchmark. The alpha is the excess return of the portfolio over the benchmark.