2 Multi-Asset ETFs To Help Offset A Potentially Volatile Q2

  • Editors Pick

As the economic and geopolitical landscape shifts, investors have been reevaluating their portfolios. Metrics suggest that we have moved away from a bull market in many asset classes, especially equities, to uncertainties in broader markets. For instance, the S&P 500 index and the tech-heavy NASDAQ 100 are down over 5.8% and 12.2% year-to-date (YTD).

Recessionary expectations are also on the rise. In recent days, Deutsche Bank warned of a looming recession. And Bank of America is skeptical of increases in stock prices, especially those seen in March.

Therefore, today’s article introduces two multi-asset exchange-traded funds (ETFs) that could appeal to a range of investors. Such funds typically invest in US and global equities, fixed income assets, commodities, currencies, and real estate investment trusts (REITs). A number of them also invest in inverse ETFs as well as cryptocurrency funds.

As a result, they might help decrease overall portfolio volatility while investors navigate changing economic conditions. Many multi-asset funds also aim to generate current income for buy-and-hold investors.

Finally, we should remind readers that the price return for the Dow Jones U.S. Select Dividend Index has been 4.9% so far in 2022. And its net total return is 5.9%. These metrics could act as a basis for comparison when analyzing various asset classes.

1. Alpha Architect Gadsden Dynamic Multi-Asset ETF

  • Current Price: $33.12
  • 52-week range: $30.68-$34.51
  • Dividend yield: 2.02%
  • Expense ratio: 0.77% per year

Our first fund, the Alpha Architect Gadsden Dynamic Multi-Asset ETF (NYSE: GDMA ), invests in other funds from different asset classes as well as stocks. This actively managed ETF could potentially hold up well across different arcs of the business cycle.

GDMA Weekly

GDMA, which has 28 holdings, started trading in November 2018. The top 10 holdings in the portfolio comprise over two-thirds of net assets of $133.51 million. Put another way, it is a concentrated fund.

Among the leading funds in GDMA, we see:

  • Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (NASDAQ: VTIP )—down 1.7% YTD;
  • Schwab US TIPS ETF™ (NYSE: SCHP )—down 5.5% YTD;
  • Invesco DB US Dollar Index Bullish Fund (NYSE: UUP )—up 4.1% YTD;
  • SPDR S&P Metals & Mining ETF (NYSE: XME )——up 37.1% YTD;
  • iShares Latin America 40 ETF (NYSE: ILF )—up 27.3% YTD.

GDMA has returned 4.0% so far in the year and 4.1% over the past year. Like other actively managed funds, returns are highly dependent on the performance of fund managers. They decide on asset allocation according to their expectations in current market conditions. Still, we believe GDMA deserves to be on your watchlist.

2. Invesco Zacks Multi-Asset Income ETF

  • Current Price: $23.69
  • 52-week range: $22.94 - $25.82
  • Dividend yield: 2.70%
  • Expense ratio: 1.00% per year

Our next fund is the Invesco Zacks Multi-Asset Income ETF (NYSE: CVY ). It invests in shares of US and global companies, preferred stocks, REITs, master limited partnerships (MLPs), and closed-end funds.

CVY Weekly TTM

CVY, which tracks the returns of the Zacks Multi-Asset Income Index was first launched in September 2006. The multi-asset ETF currently has 151 holdings, of which 89% are US-based. The rest come from Brazil (3%), China (2.2%), Japan (2.1%), and several other countries.

In terms of sectoral allocation, we see financials (36.3%), followed by energy (17%), real estate (10.4%), investment companies (10.0%), and consumer discretionary (8.8%).

The leading 10 names in the portfolio comprise over 12% of almost $120 million in net assets. Energy names EQT (NYSE: EQT ), Black Stone Minerals (NYSE: BSM ) and ConocoPhillips (NYSE: COP ); Brazilian steel manufacturer Gerdau (NYSE: GGB ); healthcare REIT Welltower (NYSE: WELL ); and self-storage REIT Life Storage (NYSE: LSI ) are among the top names on the roster.

CVY is down 3.4% year-to-date (YTD) but has returned roughly 0.8% over the past 12 months. It is currently swapping hands at 11.49 times forward earnings and 1.67 times book value. Investors hoping to minimize losses during market declines could consider researching CVY further.

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