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Advisors Favor ETFs for Tactical Trades


Many exchange traded fund investors utilize the investment vehicle to gain long-term exposure to broad markets. However, a growing number of financial advisors are selecting ETFs for short-term, tactical positions.

According to a Cerulli Associates survey of U.S. monthly product trends, 82% of respondents rate advisor appetite for tactical allocation as a large driver for ETF growth, reports Warren S. Hersch for LifeHealthPro.

Cerullie also revealed other growth factors supporting the ETF industry, including 58% of advisors are pushing to outsource portfolio allocations, and 45% of advisors have an appetite for ETF exposure but are unwilling to trade ETFs themselves. [Three Reasons Why Investors Like ETFs]

Fees are still a driving factor, with 45% or respondents pointing to low fees as a driving factor for ETF growth.

However, education may not be up-to-bar, with only 23% of respondents indicating that education efforts by ETF sponsors are a major driver for ETF growth.

Through distribution channels, 28% of ETF strategy assets went through independent broker-dealers, followed by 21% through wirehouses, 16% through regional broker-dealers, 15% through third-party vendors, 14% through registered investment advisors, 2% through direct channels, 2% through bank broker-dealers and 2% through bank trust/private client groups.

Additionally, Cerulli found that 68% of ETF strategists expect their growth to outpace that of the wider market.

“The ETF strategist space is still very much in the early stages of growth,” Cerulli said. “A few large firms, including Innealta Capital and RiverFront Investments Group, are drawing most of the assets and attention from advisors and platforms.”

ETFs had $1.5 trillion in assets under management as of July 2013, compared to $10.2 trillion for mutual funds. ETF assets increased 6.6% in July month-over-month, whereas mutual fund asset growth increased 2.6%. [The ETF Industry Is Gaining More Converts]

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.