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.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.