F-Squared Investments, the largest provider of exchange traded funds managed portfolios, said today CEO Howard Present has decided to leave the firm. Present will be replaced by Laura Dagan.
Dagan, a member of F-Squared’s board of managers since 2011, comes to the helm of the Massachusetts-based firm two months after the Securities and Exchange Commission served the company with a Wells Notice, which could be a sign the Commission is considering a civil suit against F-Squared.
“Late last year, the firm told clients it was being investigated by the SEC, and earlier this year the company said the regulator’s investigation found the firm’s historical returns overstated performance,” the Wall Street Journal reported in September.
F-Squared had $28 billion in assets under management at the end of the third quarter, according to a statement issued by the firm, meaning the firm controls over a quarter of the capital allocated to ETF managed portfolios.
““Since co-founding F-Squared, I have watched the firm grow from a six-person startup to the dominant player in its space. I couldn’t be prouder of the company we have become, but I believe it is in the best interests of our firm and our clients that I step down. I can’t think of a more qualified professional than Laura,” said Present in the statement.
Strategies offered by ETF manage portfolios 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.
Specifically, ETF managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs. A group of ETF Strategists package portfolios of ETFs into investment strategies to meet a wide range of investor demands, providing stand-alone investment strategies or a one-stop complete offering. Many portfolios can be adjusted to adapt to changing market conditions and most employ a rules-based process based on technical or quantitative factors.
According to Morningstar, there were 667 such strategies from 145 firms with $102 billion in assets under management as of June 2014, with existing managers still expanding on their current product offerings.
F-Squared has included strategic 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 like book value to price, cash flow to price and return on assets. [ETF Managed Portfolios on the Rise]
ETF Trends editorial team contributed to this article.