FMD Capital Management

Posts Tagged: high beta

Understanding High Beta ETFs

Written by David Fabian, October 31st, 2017

One important dynamic of portfolio construction and risk management is understanding how your stocks fluctuate in relation to the broader market. This factor is often referred to as “beta,” which is essentially the historical volatility of a stock or fund in relation to a benchmark such as the S&P 500 Index.

The higher the measured beta of your holdings, the greater price fluctuations they will have in comparison to the benchmark. A high beta score doesn’t necessarily mean that your investments will outperform on the upside or underperform on the downside. It simply means they have exhibited characteristics of outsized moves or over-reactions in the past.

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Goldman Sachs Debuts Hedge Fund ‘Best Ideas’ ETF

Written by David Fabian, November 08th, 2016

Hedge funds have come under fire in recent years as a streak of underperformance has led to allocation cutbacks in various pension and institutional portfolios.  Many investors are comparing hedge fund returns to passively managed vehicles like exchange-traded funds and coming away unimpressed with the results.

The crux of the issue is that active managers have had a difficult time selecting stocks or allocating to asset classes that justify their high expenses.  Returns in these vehicles are often streaky and industry correlations are becoming increasingly similar to that of an index fund.  Furthermore, the high liquidity, low costs, transparency, and tax efficiency of ETFs are strong influences in today’s modern investment landscape.

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It’s a Risk Adverse World Out There

Written by David Fabian, August 19th, 2015

Investors have been pulling back on the risk handle for some time now and shedding areas of their portfolio that may be susceptible to heightened volatility. Virtually anything connected to the energy or materials sectors has been torched this year. That extends to emerging market countries and high yield bonds, which have also felt the effects of the commodity crash. Read more

Measuring Investors’ Appetite for Risk Using ETFs

Written by David Fabian, August 12th, 2014

Each individual investor has a unique appetite for risk that should be respected when constructing a portfolio of ETFs to weather the market’s machinations. While some investors are more aggressive or trading oriented, others might lean towards a conservative mix of assets to meet their goals. Both styles should be embraced despite the tendency to not understand the risk-taking mentality of the opposite group.

But how do you define risk in the market on an intra-day basis using ETFs?  Read how at

How ETF Alpha Strategies Are Stacking Up This Year

Written by David Fabian, June 24th, 2014

The quest to generate alpha is one that is constantly evolving in the ETF industry.  Fund providers are consistently creating unique indexes designed to access a subset of stocks that they believe will provide a measure of outperformance versus the broader market.  These groupings can include momentum stocks, low volatility strategies, high beta companies, or even hedge fund clones.

Many of these individual strategies have been back tested versus a primary benchmark to provide investors reassurance that their methods have produced superior historical results.  However, alpha-seeking ETFs are typically only designed to shine when the market winds favor their specific niche.  That is why it is worthwhile to check in on these ETFs in different market environments to see how they react under a specific set of circumstances.

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