Why has the Betashares Australian Strong Bear Fund (BBOZ) leapt 15% in a month?

A man in a brown bear costume holds the head of it in one hand while raising his other arm in excited victory-style pose.

A man in a brown bear costume holds the head of it in one hand while raising his other arm in excited victory-style pose.

The Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) has had a great month.

On 11 April, shares in BBOZ closed at $3.81. At the time of writing, the Bear Hedge Fund is trading for $4.38, up 15% in a month.

With so many stocks heading the other way these past four weeks, why is the ASX-listed BBOZ putting in such a good show?

Why BBOZ is making hay this past month

BBOZ is trouncing the market today precisely because that’s what the hedge fund is designed to do in times of ASX selloffs.

According to Betashares’ website:

BBOZ seeks to generate magnified returns that are negatively correlated to the returns of the Australian share market. The Fund expects to generate a magnified positive return when the S&P/ASX 200 Accumulation Index falls (and a magnified negative return when the index rises).

BBOZ is designed to gain 2% to 2.75% for every 1% decline in the ASX 200 on any given day. When the ASX rises, the Bear Fund will lose value.

Which gives us some good insight into why the fund has been doing so well.

Since this time last month, the S&P/ASX 200 Index (ASX: XJO) is down 6.2%, having dropped another 1.56% in intraday trading today. Which puts the 15% monthly gain for BBOZ right in line with the 2% to 2.75% negative correlation Betashares aims for.

Why has the ASX 200 come under pressure?

After a strong year of gains in 2021, a year that saw BBOZ fall 32.8%, the ASX 200 has come under pressure in 2022 on several fronts.

First, Russia’s invasion of Ukraine is roiling geopolitical tensions and sending energy prices rocketing.

Second, investor concerns also include China’s COVID-zero policies seeing the country initiate lengthy, intensive lockdowns that could dim the economic growth outlook for the world’s second-largest economy.

And then there’s the fast-rising inflation in the developed world and resulting interest rate hikes on the horizon.

While those factors have dragged on the overall performance of ASX shares, Betashares BBOZ has marched higher.

The post Why has the Betashares Australian Strong Bear Fund (BBOZ) leapt 15% in a month? appeared first on The Motley Fool Australia.

Should you invest $1,000 in BBOZ right now?

Before you consider BBOZ, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and BBOZ wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/vu7HG8A

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s