Right now, investors are looking for solutions that can generate real returns — not just track an index, not just “weather the storm,” but genuinely outperform regardless of the market direction.
Enter the world of Absolute Return ETFs.
These funds aren’t just another investment trend. They’re part of a growing movement toward outcome-based investing — where success isn’t about beating the S&P 500, but about delivering positive returns in any market environment.
“Investors are tired of seeing red on their statements every time volatility hits,” says Mark Fisher, Senior Portfolio Strategist at Devon Hill Advisors. “Absolute Return ETFs offer something different — a goal-oriented approach that doesn’t rely on the broader market being in a good mood.”
Let’s break it down.
What Is an Absolute Return ETF?
An Absolute Return ETF is an exchange-traded fund that aims to deliver positive returns over a specific time period, regardless of market conditions. Unlike traditional ETFs, which typically track an index (and therefore rise and fall with the market), absolute return ETFs are actively managed and often use a variety of strategies to achieve their objective.
Those strategies may include:
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Long/short equity positions
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Market-neutral strategies
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Arbitrage trades
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Derivatives and options hedging
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Fixed income overlays
The goal? Generate consistent, low-volatility returns that don’t depend on bull markets.
Why Investors Are Turning to Absolute Return ETFs
There’s a growing appetite for risk-managed growth — especially among investors who:
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Are nearing retirement
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Can’t afford large drawdowns
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Want to smooth out volatility in their portfolio
And with central banks navigating a new interest rate era, inflation proving sticky, and geopolitical risks clouding the horizon, the appeal of uncorrelated returns has never been stronger.
“In today’s market, traditional 60/40 portfolios can’t always provide the stability investors are looking for,” says Fisher. “Absolute return strategies can offer a better cushion without giving up on the potential for gains.”
Key Benefits of Absolute Return ETFs
✅ Downside Protection
These ETFs often incorporate hedging techniques and short positions to reduce losses when markets fall.
✅ Diversification
Their performance is not tightly linked to equity or bond markets, meaning they can act as a portfolio buffer.
✅ Liquidity and Transparency
Unlike hedge funds, which have lock-up periods and high minimums, absolute return ETFs trade on exchanges — just like any other stock — with daily pricing and holdings disclosures.
✅ Cost-Effective Access to Advanced Strategies
Thanks to the ETF wrapper, investors get exposure to sophisticated strategies at a fraction of the cost of a traditional hedge fund.
✅ Positive Returns in a Flat or Negative Market
These funds are built with a clear goal: deliver returns no matter what the broader market is doing.
Common Strategies in Absolute Return ETFs
Most absolute return ETFs use a combination of these core tactics:
1. Long/Short Equity
Buying undervalued stocks and simultaneously short-selling overvalued ones — capturing alpha from both sides of the trade.
2. Market Neutral
Balancing long and short positions to eliminate broad market risk, focusing purely on stock selection and performance differentials.
3. Event-Driven or Arbitrage
Profiting from corporate events (like mergers, acquisitions, or restructurings) or pricing inefficiencies between related securities.
4. Global Macro
Using macroeconomic analysis to make directional bets on currencies, commodities, and interest rates — often through futures or options.
5. Volatility-Based Trades
Profiting from movements in market volatility using VIX futures or volatility arbitrage.
Top Absolute Return ETFs in 2025
Here are a few ETFs that consistently draw attention for their performance and strategy:
🔹 JPMorgan Equity Premium Income ETF (JEPI)
Combines dividend-paying U.S. equities with options strategies to generate steady income while buffering downside risk. Popular among conservative investors.
🔹 IQ Hedge Multi-Strategy Tracker ETF (QAI)
Designed to mimic the performance of hedge fund strategies using long/short equity, fixed income arbitrage, and event-driven investing.
🔹 AGFiQ Market Neutral Anti-Beta Fund (BTAL)
Targets a market-neutral approach by going long low-beta stocks and short high-beta stocks — offering a way to reduce market correlation.
🔹 WisdomTree Managed Futures Strategy ETF (WTMF)
Uses futures contracts across commodities, currencies, interest rates, and equities to profit from macroeconomic trends.
These ETFs are suitable for investors looking for stable, risk-adjusted returns — especially during periods when traditional assets are under pressure.
Who Should Consider Absolute Return ETFs?
Absolute return ETFs are ideal for:
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Investors who want protection with potential — particularly in uncertain markets.
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Retirees or near-retirees seeking consistent performance with lower volatility.
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Those building a core-satellite portfolio with alternative strategies as the “satellite.”
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Risk-conscious investors looking to diversify beyond stocks and bonds.
That said, it’s important to understand that these funds aren’t immune to risk. While they aim for positive returns, there’s no guarantee — especially in extreme or unpredictable markets. Expense ratios can also be higher than standard index ETFs, so evaluating cost vs. benefit is essential.
Final Thoughts
Absolute Return ETFs aren’t a silver bullet — but they are a smart addition to a forward-thinking portfolio. In a world where markets can swing wildly based on central bank language or geopolitical headlines, having a strategy that aims to deliver regardless of direction is incredibly valuable.
“We tell clients to think of these ETFs as the shock absorbers of their portfolio,” says Fisher. “They won’t always lead in bull markets, but they’ll help you stay in the game when things get rough.”
For investors seeking clarity, consistency, and control — Absolute Return ETFs could be exactly what’s needed right now.
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