U.S. Markets closed

ETF Managed Portfolios: Disruptive Innovation and Mutual Funds


After years of witnessing assets bleed out and flow to rival exchange traded fund products, the mutual fund industry is seeing the upstart ETF industry move in on the managed accounts space.

ETF managed portfolios are beginning to attract more attention and assets from retail and intermediary investors, reports Steven Miyao for InvestmentNews.

Managed accounts allocate clients’ cash across various asset and sub-asset classes for a diversified investment portfolio that tries to generate market price appreciation while managing risk. Typically, the underlying assets are made of mutual funds, with core products comprised of proprietary and third-party funds.

According to Morningstar, ETF managed portfolios currently follows 530 strategies from 125 firms with  $63 billion in assets under management. Underlying ETFs in the portfolios are mostly made of large, liquid, index-based ETFs. [ETF Managed Portfolios See Steady Growth]

While ETF managed portfolios may be tiny in comparison to mutual funds in the managed accounts space, the ETF industry can become a threat. Specifically, a number of firms with considerable market influence are promoting the use of managed ETF portfolios. For instance, Schwab, which owns the large Windhaven ETF managed portfolios, provides access to 15 firms. BlackRock sponsors over 200 firms that sell managed account portfolio solutions comprised of ETFs.

These ETF managed portfolios are also experiencing phenomenal growth rates. The portfolio assets have expanded over 300% from the $14 billion at the end of 2009.

Looking ahead, Miayo believes there are two factors that will continue to drive growth in the area: rising interest among financial advisors for asset allocation strategies that offer diversification at a low cost; and healthy performance as Morningstar data revealed solid returns with low volatility.

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.