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ETF Managed Portfolios to Diversify Advisors’ Toolkit

etftrends@etftrends.com (ETF Trends)

As financial advisors look for ways to grow their businesses, many have turned to exchange traded fund investments in multi-asset strategies or ETF managed portfolios.

On the recent webcast, Why Popularity of Multi-Asset ETF Portfolios are Booming , Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock, explained that ETF managed portfolios are investment strategies with a minimum 50% allocation to ETFs. Many ETF managed portfolios also serve as stand-alone multi-asset strategies.

Specifically, ETF managed portfolios offer three major investment themes: tactical, strategic and hybrid mix. The tactical offerings provide short-term plays to capitalize on investment opportunities that are forming, whereas the strategic play provides long-term allocation across sectors and asset classes. Additionally, the hybrid mix includes a combination of tactical and strategic elements.

For instance, Robert Smith, President & Chief Investment Officer of Sage Advisory, overseas a suite a global tactical ETF strategies that meet on a bi-weekly basis to form a rolling three to six month outlook. The team implements macro, fundamental, relative valuation and technical analysis on their group of ETF managed portfolios.

Given the current market environment, Sage Advisory is overweight U.S. large-cap stocks at 48 and developed international at 45%, with a focus on low-vol ETF strategies, and a 5% tilt toward emerging markets in its all-cap equity portfolio.

David Haviland, Managing Partner & Portfolio Manager at Beaumont Capital Management, manages a suite of tactical, defensively oriented ETF strategies. In the current low-yield environment, Beaumont’s primary fundamental themes include active fixed-income management to supplement core bond positions, which include high dividend equity ETFs for augmented yields, along with broad international equity and broad emerging market exposure.

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A number of factors have helped fuel the growth in ETF managed portfolios, such as increased client demand for ETFs, more precise exposure to market segments through ETFs, greater usage of goal-based strategies and fee litigation risk reduction.

However, Gamba warned that there are some hurdles the ETF managed portfolio space still faces. For instance, more education and due diligence are required, longer term historical performance and benchmarking will be needed, some portfolios lack a client’s desired ETF and some active bias against ETFs.

John Hyland, Head of ETF Investment Strategists at BlackRock, noted that ETF managed portfolios help financial advisors take items off their plate so that they may allocate more time to growing their advisory business. For instance, ETF investment strategists who managed the portfolios can help determine asset allocation of specific strategies, monitor securities, fulfill tax loss selling requests, meet cash flow needs, watch and rebalance accounts, and offer varying strategies based on risk profiles. Consequently, with the ETF strategists handling these ETF managed portfolios, adivsors can increase their time with clients.

Financial advisors who are interested in learning more about multi-asset strategies in ETF managed portfolios can view the webcast here on demand .