By Gerrard Cowan 

Amid the market turmoil, how are professional money managers reacting? What are they doing to limit the damage to portfolios? Here's what a few of them had to say about their current approach to the market.

Dan Draper, managing director and global head of ETFs at investment-management firm Invesco, says that so far the company has seen solid returns in funds that hedge against equity declines. In the coming weeks, Mr. Draper says investors should pay attention to such basics as strong corporate balance sheets, pointing in particular to technology stocks like those of the FAANG companies -- Facebook, Apple, Amazon.com, Netflix and Google (now under the Alphabet umbrella) -- as well as Microsoft.

Chaikin Analytics has created a rating system called PortfolioWise to help advisers identify ETFs that are likely to outperform the market. CEO Carlton Neel says the current downturn should lead investors to industries that are likely to remain successful despite -- or because of -- the impact of a pandemic. He points to the utilities, health-care and consumer-staples sectors as "the kind of stocks that can still do reasonably well in this type of environment, and are likely to be the first to recover when the market is healthier."

At State Street Global Advisors, Sue Thompson, head of SPDR ETF distribution for the Americas, points to potential strength in the technology, health-care and consumer-staples sectors. The latter two "have tended to benefit from a slowing and recessionary economic cycle as their products and services have been in demand, much like they are likely to be in this current environment," she says.

Some ETFs are designed to outperform in crises like these. One of these is BlackSwan Growth & Treasury Core ETF (SWAN) from Amplify ETFs, which provides exposure to the S&P 500 while also hedging against downturns. The fund is down only 0.2% this year, about 22 percentage points better than the S&P 500. Amplify CEO Christian Magoon argues that such funds should be a part of investors' core holdings even in good times, allowing them to buffer against significant market declines while still gaining much of the upside during good times for equities.

The most important thing is not to panic, even while others are, says Armando Senra, head of iShares Americas for BlackRock. "Perhaps practice some 'social distancing' from your portfolio by tuning out the daily ups and downs of the market," he suggests.

Turmoil like this could present opportunities for investors, says Mr. Senra. He recommends a long-term focus on quality stocks. In particular, he points to the potential for the shares of companies committed to ESG (environmental, social and governance) values, which he thinks will be better positioned as the world adjusts to a post-coronavirus environment. Mr. Senra says these companies tend to have strong balance sheets, maintain stable businesses and have strong corporate governance, while they also "tend to treat their employees well, so can recruit and retain the best talent and use resources efficiently."

Ben Johnson, director of global ETF research at Morningstar Inc., says the recent market turmoil underscores the importance of "practicing good hygiene" when it comes to trading: Investors should use limit orders when they trade, so that ETFs are only bought or sold at prices of the investor's choosing, he says. "It's the equivalent of washing your hands when it comes to trading."

Mr. Cowan is a writer in Northern Ireland. He can be reached at reports@wsj.com.

 

(END) Dow Jones Newswires

April 05, 2020 22:20 ET (02:20 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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