Exchange traded fund managed portfolios, one of the fastest-growing areas in managed accounts, encompasses global all-asset allocation strategies that help efficiently diversify across asset classes in a way that was previously only available to large institutions.
When comparing ETF managed portfolios, investment researcher Morningstar found that global asset strategies topped the total-assets lists, with $19.8 billion in assets, followed by U.S. equities $14.2 billion, global equities $7.8 billion, global blanced $6.5 billion, U.S. fixed-income $2.2 billion, international equity $2.1 billion, U.S. balanced $1.8 billion and global fixed-income $1.1 billion, writes Andy Gogerty for Morningstar. [Managed ETF Portfolios are Gaining Traction]
Growth rates has been keeping pace with the overall industry’s expansion, but asset inflows have slowed in the recent quarters.
Global all-asset strategies utilize a combination of technical and quantitative factors, such as momentum, moving average, relative value, relative volatility and yield curve scenarios, among others.
Setting its strategies apart from others, global all asset portfolios look across asset classes and market economies. Consequently, macroeconomic data will be a major factor while individual country, small regional, GDP consumption and export data are also factored in.
“Understanding the strategy’s scope is also important because the meaning of ‘Global All Asset’ or ‘Global Tactical Asset Allocation’ can differ widely across strategies and firms,” Gogerty writes. “Strategies can simply combine stocks, bonds, cash, and broad commodities or expand to smaller categories such as gold, silver, and agriculture products like corn and cocoa.”
While the industry is expanding, assets remain concentrated among a couple of players. For instance, the Windhaven Investment Management, which was acquired by Charles Schwab, includes three strategies with $12.5 billion in assets under management.
Nevertheless, other strategies are making inroads into the space. F-Squared investments have witnessed material asset growth, as well as Quantitative Advantage and Cougar Global Investment’s MAR strategies.
As with all investments, investors should take the time to do some due diligence. Gogerty suggests people should determin the starting universe of asset classes and potential allocation swings. Additionally, investors should ask about set allocation bands and how large a strategy’s tactical cash holding can grow to. Lastly, look for non-typical asset classes, such as uncommon commodities, volatility strategies or leveraged products.
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Max Chen contributed to this article.