Investing in ETFs is becoming increasingly risky as the market threatens to turn against mega-cap tech stocks, Stefan Steiner, CIO of hedge fund advisor Crossbow Partners, has told Citywire Switzerland.
With market volatility making a comeback, Steiner said he believes that the 10-year bull market is soon going to come to an end, and that FAANG stocks will see major outflows when it does.
He said: ‘I believe that these massive inflows that we’ve seen in passive instruments are, at some point, going to backfire. One reason that the Googles, Apples and Facebooks of the world have been pushed up that hard and that fast is not only because they did well, but also because they became such heavyweights and absorbed a big portion of daily flows into those ETFs.
‘Once the tides turn, those companies will suffer more than the average as money comes out of ETFs. These are risky investments.’
Despite being more expensive than ETFs, Steiner said he believes that hedge funds are the way to go.
‘Hedge funds are very active, and I think that’s important in this new environment. Over the past 10 years, you didn’t need hedge funds during the bull market, as you could achieve the same results with cheap and daily liquid passive products. Looking ahead, it’s getting more choppy and more tricky,’ he said.
‘If somebody is really able to produce alpha in good and bad times, then they’re worth paying for.’