New Trends in Portfolio Allocation

Antoine Giannetti, PhD

Incorporating Leverage

Example:Leveraged ETFs (LETFS)

Double Up, Double Down Down and even even Triple Up and Triple down.Guarantee daily leveraged returns on common indices.On S&P 500, SSO is +2X and SDS is -2X

Implementing Portfolio Theory

Example: Global Minimum Variance ETFs

USMV implements a global minimum variance portfolio.

Equal Weighted vs Value Weighted

Example: RSP is an equal weighted ETF on S&P 500 that beats SPY, the

common S&P 500 ETF.

Exploiting Views on Volatility

Example: VXX and VXZ are ETFs that allow investors to speculate on changes in

market volatility. They are based on the VIX index.

Accessing the Fixed Income Market

Example: Fixed Income ETFs like:

TLT long US bonds

TIP treasury inflation protected securities

LQD Liquid Investment Grade

HYG High Yield Corporate Debt

Investing in Sectors

Example:

XLP (consumer staples) vs XLY (consumer discretionary)

Allows for easy implementation of Beta neutral strategies

Betting on Value vs Growth

Example:

IWM Russell 2000 Index

IWD Russell 2000 Value stocks

IWF Russell 2000 Growth stocks