Ritholtz Hedges His Bets


I mentioned on Wednesday that we shifted our asset allocation towards a more cash heavy weighting (30%), then the next day, we added a 20% hedge using ETFs.

Barron’s had a few kind words to say about it:

“While last week’s broad selloff didn’t slow investment inflows to stock exchange-traded funds, it was enough to convince portfolio manager and author Barry Ritholtz that it was time to at least hedge his bets a little.

The intense selloff at midweek led Ritholtz, CEO and research director at Fusion IQ, to buy the ProShares UltraShort QQQ (ticker: QID) and the ProShares UltraShort S&P 500 (SDS). The moves effectively shifted 20% of assets in his most aggressively-managed accounts into short positions. He’s going in the opposite direction of many investors. Although more than $11 billion net left stock ETFs in the previous two weeks, about $1 billion came into the equity-fund coffers last week, according to Lipper. Four of the last six weeks have now seen net inflows to stocks.

Ritholtz, whose firm runs [under] $500 million in assets, is known for his early call of a credit bubble in 2007 and for loading up on stocks in March 2009 just as the market bottomed. He also pens the popular The Big Picture blog. In the past six weeks, his tactically-allocated accounts have moved from long positions of roughly 86% to about 50%, says Ritholtz. Cash has risen to about 30%”.

The full article goes on to discuss the increasing usage of ETFs by market professionals. They are both tax sensitive, inexpensive, and flexible.

Also, as I have mentioned many times before, Kevin Lane manages the Long/Short portfolio. He is not only an outstanding technician, but one of the best pure stock pickers I’ve ever known.


Ritholtz Hedges His Bets
Barron’s ETF Focus | SATURDAY, JUNE 4, 2011

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