Tactical ETF Managed Portfolios Turn Defensive

November 2nd at 9:00am by Tom Lydon

After the impressive run over the past couple of months, equities and stock exchange traded funds are beginning to taper off, causing some fund managers to shift to defensive positions in their ETF managed portfolios.

“Over the past four weeks, we’ve been seeing fewer stocks participating in the current rally,” Brad Thompson, chief investment officer and his team at Stadion Money Management, said in a Wall Street Journal article. “We’re concerned about the sustainability of this recent upward trend and the vulnerability of market leaders if stocks remain choppy.”

Consequently, Sadion Managed Strategy, an ETF managed portfolio with $850 million in assets, has begun leaning toward a defensive posture. [Checking Under the Hood of ETF Managed Portfolios]

“Outsourcing of managed accounts between advisers has traditionally been done through mutual funds and individual securities,” Alois Pirker, research director at market tracker Aite Group, said in the article. “But as the [outside] portfolio-management market has grown, hiring managers with experience running ETF strategies has become an attractive alternative.”

Currently, Thompson’s team is diminishing exposure to small- and large-cap domestic stocks, as a result of current technical factors driving the markets, and taking a larger position in cash. [Fee-Based Advisors Driving Growth of ETF Managed Portfolios]

“As a tactical player trying to manage risks in uncertain market conditions, we’ve decided to take a wait-and-see attitude,” Thompson added. “We’re building cash positions and remaining liquid so we’ll be ready to move once momentum clearly shifts one way or the other.”

While Thompson is avoiding developed foreign markets, he believes the emerging markets offer some opportunities.

“Growth appears spotty at best, and we remain cautious over the near term about Europe, Japan and developed Asia,” Thompson said. “We see funds that focus on emerging consumer markets as well positioned to continue to build momentum.”

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.

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