The exchange traded fund investment strategies, or ETF managed portfolios, segment of the market is quickly growing as advisors outsource fund portfolio services and cater to the greater demand for retirement and financial advice.
According to a press release, iShares research found that ETF Investment Strategies (EIS) – registered investment advisors (RIAs) or asset managers using ETFs as the core of an outsourced investment solutions business – is growing trend in every stage of the investment process, including broad allocation models to specific strategies. [Ex-Merrill Strategist Bernstein Launches ETF Model Portfolios]
Advisors are now providing “clients institutional quality portfolios and product innovation that once were too expensive and impractical for retail investors to own,” Sue Thompson, Head of iShares Registered Investment Advisor/Asset Management Group at BlackRock, said in the press release.
Thompson noted that the move into EIS marks a “true sea of change.”
“Advisors increasingly recognize that ETF Investment Strategists can help decrease time spent on portfolio issues, create more time for building client relationships, and yield distinctive advisory value via their delivery of model ETF portfolios,” Thompson added.
Currently, iShares tracks more than 200 ETF strategies from over 100 managers with $46 billion in assets. Morningstar is also following its own set of 370 portfolios with $27 billion in assets.[Should Advisors Use ETF Managed Portfolios?]
Earlier this year, Morningstar also projected that the ETF managed portfolio space has between $40 and $100 billion in assets. iShares estimates that the sector could grow to $120 billion in ETF assets by 2015.
According to the iShares Connect Program, almost 80% of successful ETF Investment Strategies put client satisfaction first. Managers that used a greater allocation in ETF outsourced investment management were also more likely to exceed their business expectations. Additionally, successful EIS maintained a strong strategic direction.
“A consistent track record and fund performance are critical drivers of client satisfaction, but we also encourage managers to cultivate other important features for their business such as compelling product attributes, responsiveness among their wholesalers, and superior education and commentary,” Katharine Earhart, Head of iShares Connect Program at BlackRock. “Integrity in all aspects of the client relationship is, naturally, an indispensable quality as well.”
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Max Chen contributed to this article.