The Vanguard Group has been growing in the exchange traded fund model portfolios in the separate accounts space, offering customized ETF managed portfolios to investors through financial advisors.
The Vanguard ETF strategic model portfolios has not been widely promoted but are quickly gaining assets as financial advisors access the strategies through the Envestnet and Cambridge Investment Research platform, reports Trevor Hunnicutt for InvestmentNews.
Vanguard began reporting its suite of ETF model portfolio offerings in the fourth quarter of 2014. It was the 16th largest ETF strategist in the space with 25 reported model portfolios and $1.1 billion in assets under management, according to Morningstar.
“It’s in direct response to demand from advisers, and to some degree advisers wanting to streamline and outsource,” Mike Lucci, a senior sales strategist at Vanguard, said in the InvestmentNews article. “For us, the value proposition is all about beta. It’s about low-cost, broadly diversified beta.”
Moreover, Vanguard’s partnership with Cambridge could also allow ETFs to make greater inroads into the retirement-plan market. Colleen Bell, first vice president for retirement and wealth strategies at Cambridge, said investors can access Vanguard ETFs through its retirement-plan serving division. Many may be attracted to the low costs associated with the ETF structure. For instance, the average expenses of the models range between 0.07% and 0.14% annually.
“The conversation around fees has become more sensitive and people do look for low-cost solutions that complement their own philosophy,” Bell said in the article.
The Vanguard CRSP 60%Equity/40%Fixed Income model portfolio was the fastest growing strategy last year, attracting $298.5 million in assets with a 1-year growth rate of 134.4%, according to Morningstar data. The portfolio has returned 6.9% over 2014, 11.1% over the past three years and 9.3% over the past five years.
There were 699 ETF model portfolio strategies from 146 firms with $91 billion total assets under management as of the end of December 2014. Assets shrunk 5% over the fourth quarter. [A Rough Q3 Tempered ETF Managed Portfolio Growth]
ETF managed portfolios are investment strategies that hold more than 50% of assets invested in ETFs and represented one of the fastest growing segments in the separate accounts space. Specifically, ETF managed portfolios offer three major investment themes: tactical, strategic and hybrid mix. The tactical offerings provide short-term plays to capitalize on investment opportunities that are forming, whereas the strategic play provides long-term allocation across sectors and asset classes. Additionally, the hybrid mix includes a combination of tactical and strategic elements.
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Max Chen contributed to this article.