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ESG ETFs Holding Up Against Market Rout

A while ago we reviewed a number of ESG ETFs from iShares and built a portfolio with very impressive risk adjusted characteristics. Given the noise surrounding the ESG movement, I was curious to see how these ETFs are performing given the market turmoil in the last couple of months; in a pleasant surprise, I find them doing rather well by comparison.

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You may notice there are basically two groups of funds: bond funds and equity funds. The bond iShare ETFs are doing well relative to the S&P Bond Index and the equity ETFs are doing reasonably well vs the S&P 500. Putting the returns and volatilities of these on a scatter plot makes this effect much more clear. The phrase “birds of a feather flock together” springs to mind.

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Notice how most of the funds in each of the groups (actually, all funds, except for one) are doing *relatively* better than their respective benchmark. Also notable is the enormous volatility if we consider it on an annualized basis - the bond ETFs are now more volatile than equities were just a few short weeks ago, and equity volatility is completely insane. We can see this explosion of volatility on a rolling 30-day plot, measured from the beginning of the year:

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Everything we see today is the stuff for history books and it is still difficult to process that we are actually living it. I do believe “this too shall pass” though, and in a few years we will be looking back at this time as some kind of very bad dream; most likely we’ll be watching a brand new movie about it, like a remake of “Pandemic”, but this time it will be a documentary. In the meanwhile, we still need to do our jobs, and as an investment professional, it is interesting to see how different funds are performing relative to others. It’s better than trying to watch all the new drinking videos on Instagram, that’s for sure.

Something that’s much bigger than me analysing ETFs is the work that all of the medical professionals are doing to help others during this crisis, at significant risk to themselves and their families. We’ve partnered with New Image Works to raise money to provide N95 masks, gloves and vaseline to Chicago area hospital staff. If you’re in the Chicago area, we need your help - have a look here to see how you can help.

Dmitri Alexeev is Founder and CEO of AlphaBot, a collaborative platform for alternative investment research.

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