It’s beginning to look like the long, lingering post financial crisis hangover isn’t going away any time soon thanks in part to the situation in Greece and a bit of surprise news last week from the International Energy Agency.
I’ve written before about the growing role of ETFs as a “liquidity sleeve” for institutional investors during tough markets—an overlay of ETFs on a portfolio can be a first line of defense when a plan sponsor needs to rebalance in a hurry (think of it as an escape hatch).
Given what global markets are dishing out, now could be a good time to revisit the idea of an ETF escape hatch, especially as we move into the rocky summer months. Here are just four types of ETFs that could give pension portfolios access to growth markets along with a liquidity boost over what promises to be a long, hot and potentially tumultuous summer:
1. ETFs from Chile or Brazil
Plan sponsors have their eye on emerging markets in Latin America—these two markets are at the top of the list (see this recent interview with AimCo chief Leo deBever for example). ETFs aren’t just a way to smooth the transition into promising markets like Chile and Brazil, they can also keep you liquid once you’re there.
2. Infrastructure ETFs
With inflation on the horizon, infrastructure investments are an effective way to hedge risks. But unless you’re a mega-fund, deals can be scarce and hard to access. Infrastructure ETFs can be a way to explore the asset class that’s easy to get in and out of.
3. Real estate ETFs
An ETF overlay around real estate is another way to crisis-proof a pension portfolio over the summer.
4. Fixed income ETFs
In 2008, some of the only instruments trading at the height of the crisis were fixed income ETFs—putting an ETF overlay on a fixed income portfolio can help prepare a pension portfolio to prepare for unwelcome surprises in uncertain times.