Alternative Investments: How ETFs Held Up in a Crisis

June 16, 2020 | Alternative Investments, News

Reflections on COVID-19…on ETFs’ 20th birthday in Europe.

Funds Europe checked out ETFs and how they performed during the crisis triggered by a black swan event such as the COVID-19 pandemic.

Here’s what the experts said.

ETFs became a valuable price discovery tool

Kenneth Lamont, Senior Analyst, Manager Research, Passive Strategies, Morningstar, said the crisis tested ETFs and that “they passed with flying colors.” Even during a period of poor liquidity due to the adverse market conditions, exchange-traded funds continued to trade, allowed investors to get out of positions, and served as a price discovery tool.

Healthcare oriented exchange-traded funds

Howie Li, Head Of ETFs, Legal & General Investment Management, said telehealth witnessed a huge surge in demand during the pandemic. Further, ETFs that held companies participating in research to combat COVID, such as Abbott, Thermo Fisher Scientific, and Danaher (diagnostics) and Regeneron, Moderna, and Incyte (vaccines) were outperformers.

Key trends

Wallace Tsang, Asia-Pacific Head Of Intermediary Business, Value Partners Group, said:

  • Investors have started to diversify into assets having a low correlation to the risky assets
  • Gold is gaining favor due to its safe-haven status, liquidity, and a negative interest rate environment. Weakness in the dollar and global QE will bolster gold.
  • Investors should watch out for volatility in the price of gold.
  • “Nonetheless, we believe any temporary setback in its worth provides an opportunity for investors to accumulate, as the uptrend of performance has just started while most key factors for the gold price to rally are in place.”

Related Story:   “ETFs’ Finest Hour” – Dave Nadig                                           

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