From the September 2013 issue of Research Magazine • Subscribe!

Shorting International Stocks

AdvisorShares has rolled out its second bear-market ETF, and here's why

Stock traders in Brazil. (Photo: AP) Stock traders in Brazil. (Photo: AP)

It remains to be seen whether the ­relative underperformance of developed international stocks versus U.S. stocks escalates into something worse. But AdvisorShares isn’t waiting.

The company rolled out its second bear market themed ETF, the AdvisorShares Athena International Bear ETF (HDGI).

HDGI shorts international stocks and follows the successful launch of the AdvisorShares Ranger Equity Bear ETF (HDGE).

Although both funds employ the general goal, how they execute is quite different.

HDGE uses a bottom-up, research-driven security selection method to choose U.S. companies with low earnings quality or aggressive accounting that might be good short candidates, whereas HDGI incorporates behavioral finance to locate international stocks to short.

The fund’s subadvisor is AthenaInvest Advisors, and its founder C. Thomas Howard believes behavioral indicators can foretell performance and result in a persistent spread between high rated and low rated stocks. As part of its strategy, the firm uses both equity manager behavior and investor behavior factors to find investments poised for a fall.

HDGI charges 1.50% annually and assesses another 0.50% in short interest expenses and miscellaneous fees.

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