The Riskalyze Report: Advisors Add to Hedges

At the request of so many investment advisors, my friends at Riskalyze share the big trends in the assets going into and coming out of advisor portfolios every week. The underlying data is aggregated from hundreds of thousands of client accounts across the $120 billion and counting that advisors manage on the Riskalyze platform*. I hope we can uncover interesting trends for you each week…


June 12th – June 18th

Winners (advisor flows TO these investments increased substantially):
  1. Gold (IAU)
  2. Long 20+ Year US Treasury (TLT)
  3. Healthcare (XLV)

Losers (advisor flows FROM these investments increased substantially):

  1. Target (TGT)
  3. Managed Futures (AQMNX)


Josh here, early last week everybody was super-Brexity and worried about the EU Referendum as the next big event to cause a market shock. I have to be honest, I was surprised to see this attitude – not one of the big bad events for which we had both a date and the potential for a binary outcome has done much damage in the post-crisis period. Remember the sequester? Remember Grexit? You might, but your portfolio sure doesn’t.

This is because risk markets are extremely good at ferreting out the potential for loss for a particular event and pricing it in way in advance. The tremors leading up to these things are the positioning mistakes of the amateurs who think they’ve been let in on a big secret by the media. On Wednesday, on the homepage of Yahoo Finance, I saw an ad for TD Ameritrade specifically mentioning “hedge your portfolio against Brexit risk today!” That’s when I showed it to the dude next to me and said “This is how you know it will be a non-event.”

I tend to view the big scary events as opportunities to make money to the upside, not to hedge against. See Brexit “Remain” Vote as Market Catalyst and Buying on Vix Spikes as two recent examples of this line of thinking. This is not to say that hedging is bad, because things can certainly go the wrong way at some point. It’s just that my attitude toward the potential for volatility is that no one will be able to see the source of it in advance, it’s always something out of left field that no one is talking about until it’s already halfway toward too late.

Anyway, some advisors weren’t taking any chances and last week added to a pair of classic hedges – the long bond and gold. According to Riskalyze CIO Mike McDaniel, “Advisor use of gold and long term US Treasuries increased by over 7% week over week.” I guess if you didn’t have enough protection on as part of a regular allocation, last week felt like as good an opportunity as any to add some.

(to state the obvious, Riskalyze does not share client sensitive data with me or use animals in testing).

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