The nascent group of easy-to-use exchange traded fund manage portfolio strategies could be a good way for 401(k)-type saving plans to reduce costs and potentially augment returns.
Kim Arthur, CEO of Main Management, believes managed ETF solutions might be the way of the future, reports John Wasik for Forbes.
ETF managed portfolios is a quickly growing segment of the separate accounts space that are comprised of a selection of low-cost ETFs to provide a general investment portfolio strategy. A manager, or so-called ETF Strategist, can bundle them for a diversified 401(k) plan.
The 401(k) market is dominated by mutual funds. However, the investment vehicle is costly.
“The expense ratio for mutual funds in retirement plans with under $10 million in total assets typically averages around 1 percent, or $100 for each $10,000 invested,” Arthur said. “Many plan participants fail to appreciate that they’re paying a full percentage point of their invested assets for a portfolio that they have to manage themselves.
The main sticking point in favor of ETFs for 401(k)s is the ability to lower fees. [ETF Growth Themes: Strategists and Managed Portfolios]