Currently, there is approximately $45 billion invested in alternative ETFs, according to Morningstar – just 2% of total ETF assets. Investors have been slow to adopt these products. In some cases, their hesitance is for good reason, but in others, it stems from a lack of understanding and implementation guidance. There are a number of reasons alternative ETFs have been avoided during their limited history; however, those reasons may face strong resistance going forward.
Since the 2008 financial crisis, there has been a consistent trend of positive bond and stock returns, with only a few years suffering major declines. Because of this, investors have had little reason to stray from traditional asset classes into the abyss of alternative products, let alone relatively new alternative ETFs. However, along the way there have been some glimmers of hope that may provide insight into the future.