The Clough Hedged Equity ETF (CBLS) seeks to provide equity market exposure while implementing hedging strategies to reduce downside risk during market declines. This alternative equity ETF combines long stock positions with protective instruments to deliver smoother returns than traditional equity investments.
How It Works
CBLS employs an actively managed approach that maintains long positions in U.S. equities while using derivatives such as put options, short positions, or volatility instruments to hedge against market downturns. The fund's portfolio managers dynamically adjust hedge ratios based on market conditions and volatility expectations. Rebalancing occurs regularly to maintain optimal risk-adjusted exposure, with the goal of capturing 60-80% of market upside while limiting downside participation to 40-60% during corrections.
Key Features
- Actively managed hedging strategy designed to reduce portfolio volatility compared to unhedged equity exposure
- Recently launched fund offering institutional-quality risk management techniques previously available only to sophisticated investors
- Zero expense ratio structure making hedged equity exposure cost-competitive with traditional passive equity ETFs
Risks
- This ETF can lose value if hedging strategies fail to protect during market declines or if hedge costs exceed benefits during prolonged bull markets
- Active management risk means the fund may underperform both rising and falling markets if timing or hedge selection proves ineffective
- Limited track record as a newly launched fund makes performance prediction difficult, with potential for strategy adjustments during early operations
Who Should Own This
Best suited for moderate-to-conservative investors with 3-5 year time horizons seeking equity exposure with reduced volatility. Appropriate as a core holding (20-40% of equity allocation) for those prioritizing capital preservation over maximum returns. Medium risk tolerance required, ideal for investors approaching retirement or those uncomfortable with full equity market swings.