Exchange traded funds are making inroads into the separate accounts space as more advisors and investors take a closer look at customized managed portfolio strategies comprised of low-cost ETFs.

According to Morningstar, ETF managed portfolios, or strategies with over half of their assets in ETFs, saw assets increase 40% over 2013 to $96 billion. The strategies allow a new breed of so-called ETF strategists to customize tactical short-term or strategic long-term portfolios for advisors and investors in a changing market. [The Evolution of Bespoke ETF Portfolios]

For instance, F-Squared Investments, the largest ETF portfolio manager, has broken away from conventional benchmark investments, switching over to strategies that protect against falling markets, reports Chris Flood for Financial Times.

F-Squared has included so-called smart-beta ETFs in its portfolios, such as the First Trust AlphaDEX ETFs, which select holdings based on growth factors like 3-, 6- and 12-month price appreciation, sales to price and one year sales growth, along with value factors lik book value to price, cash flow to price and return on assets.