IndexIQ Announces Top Five ETF Trends and Insights for 2016
Divergent central bank policies, currency fluctuations, the return of inflation and more;
Why 2016 will be the year of mitigating volatility
Why 2016 will be the year of mitigating volatility
RYE BROOK, New York, January 26, 2016 –IndexIQ, a pioneer and leading provider of innovative investment solutions, today delivered its top five ETF market insights and trends for 2016. Key highlights include:
1. Currency hedging to be fueled by divergent economic policies.
The Fed’s tightening (the pace of interest rate increases) will be a source of constant speculation among both stock and bond investors and may introduce volatility to the yield curve. There is even some speculation that, given global economic weakness, the Fed may be forced to reverse course. We believe that at a minimum, the divergence of central bank policies will create further market distortions with the relative movement of currencies having a bigger than usual impact on returns.
2. Inflation may finally start to make its presence felt.
With the U.S. economy continuing to expand and wage growth showing some signs of accelerating, inflation may spring to life in the coming year, providing a new source of market worry. If history is any guide, once prices start up they’re not always easy to contain. A multi-asset strategy built on asset classes that have historically performed well during periods of inflation is one way to hedge against this possibility.
3. Hedge fund strategies may become more attractive.
In a rising rate environment where fixed income investments decline in price, investors may want to consider allocations to strategies that have the potential to go up in a rising rate environment yet provide relatively low volatility. This is the traditional role played by “hedged” products, and the confluence of these trends point to resurgence in interest in these vehicles.
4. Commodities may finally find a bottom.
This is a tough call, but it does take advantage of one of the more powerful forces in investing: regression to the mean. Oil, copper, and other basic commodities have been pummeled. We believe that at some point, they’re bound to recover and this might be the year. At the very least, we believe commodities will be worth a fresh look after new rounds of easing in China and Japan. Suitable investors who agree with this thesis may want to consider at least a modest exposure to the asset class.
5. Dynamic ETF innovation to continue at rapid pace.
We expect the growth of the ETF industry to continue at a rapid pace, with dynamic innovation continuing, as fund sponsors look for new ways to help meet the changing needs of investors. We believe liquid alternatives will see increased demand as diversification tools to help investors manage volatility. Global M&A (merger and acquisition) activity is also likely to remain elevated as companies look to grow through acquisition. In 2016, the products likely to find favor are those that help manage domestic and international equity volatility, interest rate risk, and the impact of currencies on investors’ portfolios.
“The slowdown in China, an unsettled geopolitical situation, the ongoing impact of currency devaluations on growth and trade, and a pending U.S. election suggest that investors will be grappling with increased market volatility in 2016. As central bank policies diverge and a broad range of generally non-correlated asset classes show greater independence, we believe investors will increasingly look to liquid alternative products to help manage potential fixed income, equity, and currency volatility impact on their portfolios,” said Adam Patti, CEO of IndexIQ.
Noting that assets in alternative ETFs already exceed $350 billion, Patti believes that innovation in the ETF industry will continue, as fund sponsors look for new ways to meet the changing needs of investors. “We may see other new developments in ETFs in 2016, including the entry of several new players into the space, so competition is going to remain fierce,” he added. “What’s important is that we as an industry don’t let our product innovation outkick our educational efforts. It’s important that investors and advisors continue to receive the support they need to make well-informed decisions about what types of ETFs might be right for their needs and goals, and the best ways to trade ETFs going forward.”
To view the full 2016 outlook, please visit: IQetfs.com
IndexIQ is a pioneer and leading provider of innovative investment solutions focused on absolute return, real assets, and international strategies. IndexIQ’s solutions are offered as ETFs, mutual funds, separately managed accounts, and ETF model portfolios. The company's philosophy is to democratize investment management by providing all investors with cost-effective access to the types of high-quality, sophisticated investment products that typically have been reserved for institutional and ultra high-net-worth investors. IndexIQ’s mission is to take indexing to the next level by combining the best attributes of both passive and active investing, and make strategies available to investors in low cost, liquid, and transparent products*. IndexIQ is an indirect, wholly-owned subsidiary of New York Life Insurance Company. Additional information about IndexIQ and its products can be found at www.IndexIQ.com.
*The nature of IndexIQ's products allows for these potential benefits, which typically are not associated with traditional hedge funds.
The information and opinions contained herein are for general information use only. IndexIQ does not guarantee their accuracy or completeness, nor does IndexIQ assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are as of the date of this report, are subject to change without notice. Past performance is no guarantee of future results.
Liquid alternatives are alternative investment strategies that are available through vehicles that provide daily liquidity, such as mutual funds and ETFs.
All investments are subject to risk and will fluctuate in value. Alternative investments are speculative, entail substantial risk and are not suitable for all clients. Alternative investments are intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment. Investments in absolute-return strategies are not intended to outperform stocks and bonds during strong market rallies. Hedge funds and hedge fund of funds can be highly volatile, carry substantial fees, and involve complex tax structures. Investments in these types of funds involve a high degree of risk, including loss of entire capital. Investments in derivatives often involve leverage, which may increase the volatility of the investment and may result in a loss.
Consider the Funds’ investment objectives, risks, and charges and expenses carefully before investing. The prospectus and the statement of additional information include this and other relevant information about the Funds and are available by visiting IQetfs.com or calling 888-934-0777. Read the prospectus carefully before investing.
MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. IndexIQ® is an indirect wholly owned subsidiary of New York Life Investment Management Holdings LLC. ALPS Distributors, Inc. (ALPS) is the principal underwriter of the ETFs. NYLIFE Distributors LLC is a distributor of the ETFs and the principal underwriter of the mutual fund. NYLIFE Distributors LLC is located at 169 Lackawanna Avenue, Parsippany, New Jersey 07054. ALPS Distributors, Inc. is not affiliated with NYLIFE Distributors LLC. NYLIFE Distributors LLC is a Member FINRA/SIPC.
For additional information, please contact:
Chris Sullivan/Mike MacMillan
New York Life Insurance