Yesterday we covered a niche category in ETFs, “Long/Short” funds, which are still far from maturity in terms of recognition and asset growth, and today we lean toward another category that is on a similar path of growth, “Multi-Asset” or “Diversified Portfolio.”
The recent equity sell-off that hit Emerging and Developed equity markets alike, and also spurred into action Precious Metals , Fixed Income securities, and Commodities for instance illustrate the importance that advisors now place on Global “Multi-Asset” portfolios that may and do contain the aforementioned securities in some diversified manner.
MDIV (First Trust Multi-Asset Diversified Income, Expense Ratio 0.60%) has impressively risen to the number one ETF in terms of assets under management in the category, gathering $539 million in a relatively short amount of time (inception in 8/2012).
MDIV employs a methodology driven by the NASDAQ Multi-Asset Diversified Income Index, and invests in small, mid, and large cap stocks which cover a spectrum of equities that have historically paid dividends (domestic and international), REITs, MLPs, U.S. listed preferred names, as well as “an index-based exchange traded fund that invests in high yield or “junk” bonds” according to ETFdb.com.
If we look at current holdings in MDIV, the diversified approach becomes more tangible and evident, with top holding currently HYG (iShares HY Corporate Bond, Expense Ratio 0.50%), followed by some single equity names TWO (1.71%), NLY (1.70%), IVR (1.67%) and MFA (1.55%). Note the presence of REITs and dividend payers here. MDIV carries a 5.94% yield currently as well, which likely explains much of the momentum the fund has had over time in catching investor attention.
The fund traded at an all time high of $21.669 in Mid-May of last year, and is currently trading about 3 percent below this level. iShares has a suite of Multi-Asset ETFs on the market that compete with MDIV, under the “Allocation” banner, the largest of which are currently AOR (iShares Growth Allocation, Expense Ratio 0.31%) and AOA (iShares Aggressive Allocation, Expense Ratio 0.32%) which have $246 million and $218 million in AUM respectively.
There are an impressive forty three ETFs currently classified in this category, many of which due to unique design structure will warrant deeper discussions in future columns.
First Trust NASDAQ Multi-Asset Diversified Income Index Fund
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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