Global X Funds, a New York-based provider of exchange-traded funds, has launched the Global X Permanent ETF (PERM), a diversified multi-asset ETF designed to perform regardless of the prevailing economic environment.
Global X Funds launches all-seasons multi-asset ETF.
As an all-seasons ETF, intended to be held permanently, the fund is based on the premise that the average investor may not be properly diversified, which, in turn, may lead to underperformance, particularly when the market environment changes rapidly.
Therefore, in order to remain diversified in different economic climates (increasing growth, decreasing growth, increasing inflation and decreasing inflation), the fund holds a range of asset classes that perform differently in each type of environment.
These asset classes are equities (25%), short-term treasury bonds (25%), long-term treasury bonds (25%), gold (20%) and silver (5%). While each of these may be volatile individually, when combined together they have historically delivered moderate, but relatively stable, returns.
Each asset class contributes a vital dimension to the portfolio. During growth periods, when inflation expectations are typically stable and companies are able to expand, equities generally outperform. Conversely, during recessionary periods, when demand for liquid safe-haven assets increases, short-term treasury bonds tend to outperform.
Meanwhile, when inflation expectations increase, prices of hard assets such as gold and silver tend to rise, while during periods when inflation decreases unexpectedly and interest rates generally fall, longer-duration treasury bonds tend to experience price appreciation.
Given current economic uncertainty and continued volatility in the marketplace, investors may stand to benefit from such a product that is essentially market agnostic.
According to Bruno del Ama, chief executive of Global X Funds, “the Global X Permanent ETF is designed to preserve and increase purchasing power over the long term. PERM provides access to this diversification in a single, cost-effective ETF.”
The fund tracks the Solactive Permanent Index, is listed on the NYSE Arca and comes with an expense ratio of 0.49%.