Thousands of financial advisors gathered at the ETF Virtual Summit conference Wednesday where attendees perused strategies in a dynamic and expanding exchange traded fund industry.
Leading industry advisors and experts, such as keynote speaker Douglas Hodge, CEO of PIMCO, provided their view on the ETF industry and positioning for the new year.
Attendees heard from panels that covered global strategies, broad investment ideas for 2015, yield generation, risk management, alternative assets and the growing breed of so-called smart-beta indices. Advisors who missed their chance to view the ETF Virtual Summit experience on demand.
Financial advisors were asked their views on various hot button topics they were considering in the new year and heard how industry experts believe the markets with pan out.
On the Annual Pundits Roundtable: 2015 ETF Outlook, Tom Lydon, Editor and Publisher of ETF Trends, Ben Johnson, Director of Global ETF Research at Morningstar Inc., and Matt Hougan, President of ETF.com, kicked off the ETF Virtual Summit with a candid chat regarding the ETF industry. The trio delved into asset flows over the past year and provided their views on potential changes in investment interest ahead as global central banks begin shifting policies and other developments in fixed-income assets and foreign currencies. [Dividends, Robo Advisors, Other Vital Topics in the Spotlight at the ETF Virtual Summit]
Advisors are more concerned about a correction in equities than the effects of a Federal Reserve rate hikes on fixed-income assets and potential continued U.S. dollar appreciation.
On the Simple Global Strategies in a Sophisticated ETF World panel, financial advisors revealed that they were most concerned about a potential pullback in the U.S. markets after years of a Quantitative Easing-induced rally.
Dodd Kittsley, Head of ETF Strategy at Deutsche Asset and Wealth Management, with Deborah Fuhr, Partner and Co-founder of ETFGI, also touched upon the potential opportunities overseas where investors may find value. [Simple Global Strategies in a Sophisticated ETF World]
“Earnings in the United States and Japan have more than recovered since 2008, helped in part by QE,” Kittsley said. “In Europe, there is ample room for earnings/profitability improvement, which drives DeAWM’s outlook for the region in 2015.”
Additionally, with overseas central banks enacting loose monetary policies, investors will have to consider currency risks as well as they diversify with international equities. An appreciating U.S. dollar or weaker foreign currencies means that any foreign equity returns could experience an indirect loss through currency conversion. Nevertheless, there are a number of currency-hedged equity ETFs available to diminish Forex risks.
Advisors listened to PIMCO Leaders Talk 2015 Investment Strategy on the keynote panel. PIMCO’s CEO, Douglas Hodge, along with Scott Mather, CIO U.S. Core Strategies, and Mark Kiesel, CIO Global Credit, provide an overview of their fixed-income team and the continued excellence that they strive to achieve. [Even Without Bill Gross, BOND ETF Is In Good Hands]
“So much attention has been paid on change, but perhaps – more powerful, what hasn’t changed,” Hodge said. “We have a very large and unique team of talent here at PIMCO. They are all still in place just as they were a year ago…. Our investment process; that hasn’t changed.”
Advisors are making meaningful moves in fixed-income portfolio allocations in anticipation of Fed rate hikes.
On the Income Conundrum: Balancing Yield and Risk panel, financial advisors revealed they were beginning to shake up their fixed-income allocations in response to the myriad of factors that could affect bonds ahead. [The ETF Income Conundrum: Balancing Yield and Risk]
Investors are growing wary after a three-decade long bull rally in the fixed-income market and are positioning ahead of the eventual Federal Reserve interest rate hike. Moreover, global fixed-income options are gaining traction as overseas central banks enact loose monetary policies of their own.
Mark D. Carlson, Senior Investment Strategist of Fixed Income at FlexShares ETFs, Fran Rodilosso, Senior Investment Officer at Market Vectors ETFs, and Matt Hougan discussed income strategies for today’s markets and positioning portfolios to withstand rising interest rates on the fixed-income panel.
Many advisors acknowledge that reducing portfolio risk is the main objective as flows into liquid alternative assets rise.
On the Taking Advantage of the Alternative ETF Opportunity panel, many advisors revealed that they have taken a greater interest in alternative investments to diversify and generate low risk-adjusted returns.
Simeon Hyman, Head of Investment Strategy at ProShares, Mike Eschmann, Managing Director and Co-Head of the Capital Markets & Institutional Strategy Team at Direxion Investments, and Keith Black, Managing Director of Curriculum and Exams at the CAIA Association, evaluated various alternative investments, their importance in a total asset allocation and options to reduce portfolio risk. [ETF Virtual Conference: Alternative Investment Opportunities and More]
“Alternative investments have long been seen as an exclusive option available to institutional investors as a way of potentially providing some measure of protection in down markets as well as the potential for higher returns,” Hyman said. “But today, innovations in the mutual fund and ETF marketplace have made many of these alternative strategies available to a wider range of investors. They are gaining popularity as a way to potentially enhance risk-adjusted returns.”
A little over half of financial advisors plan to increases their smart-beta ETF portfolio allocations.
Financial advisors also showed greater interest in allocating toward smart- or strategic-beta index-based ETFs during the Indexing Innovation: Launching ETFs to the Next Level panel where attendees heard from Luciano Siracusano, Chief Investment Strategist and Head of Sales at WisdomTree Asset Management, Dan Draper, Managing Director of Invesco PowerShares, and Ben Johnson discussing benchmark construction, the advantages of smart beta indexes and what we should expect in 2015.
It’s not just advisors and retail investors who are interested in smart-beta index strategies.
“A majority of institutional decision makers plan to increase use of ETFs and smart beta ETFs stand to grow at the highest rate,” Draper added.
Advisors interested in any of the ETF Virtual Summit panels can still register here and listen on demand.