Another year has come and gone, and Chicago is gearing up to host this year’s Morningstar ETF Conference Sept. 6-8 conference at the Hyatt Regency.
Financial advisors and industry experts will convene to exchange investment tips and ideas to optimize an ETF portfolio in a shifting market environment and to tap into a dialogue about the latest developments in the industry.
At the Morningstar ETF Conference, a number of Morningstar analysts, like Ben Johnson, Alex Bryan and Adam McCullough will kick off the event by providing Morningstar data on research, ETF due diligence, and stewardship practices, among others.
Along with providing research points and in-depth analysis on ETFs, the Morningstar conference will also highlight a number of hot button topics that are shaping up in the current market, such as the rise of smart beta ETFs, strategies in a rising rate environment and international opportunities, to name a few.
For example, Lukas Smart of Dimensional Fund Advisors, Kal Ghayur of Goldman Sachs and Rob Nestor of BlackRock will discuss the rising number of smart beta ETF strategies on the panel titled “Making Sense of the Multitude of Multifactor ETFs.” There are now 730 various enhanced ETF strategies that do not adhere to traditional market cap-weighted methodologies with $607.7 billion in assets under management, according to XTF data. Consequently, investors have to more thoroughly scrutinize options to differentiate products and find the right one to fit in their portfolios.
Darby Nielson of Fidelity Investments, Raman Aylur Subramanian of MSCI and Jason Stoneberg of Invesco PowerShares will head up a panel titled “How Might Defensive Strategies Fare in a Rising Rate Environment?” to help advisors find clarity through the fog of rate risk ahead. After a three-decade long bull run and stubbornly low interest rates, fixed-income and equity investors will have to re-evaluate their positions in a changing market ahead.
Nielson, speaking to ETF Trends, said investors can consider the impact of rising interest rates on defensive strategies from two important perspectives – the effects on both sector and factor returns.
“Through a sector lens, our research indicates technology, health care, and energy have had the best performance on average when the Fed was raising rates; meanwhile, utilities and consumer discretionary have had the worst,” Nielson said. “But there are important distinctions depending on the economic environment – if you look back at all the periods when the Fed was raising rates since 1962, about one third of the time, the Fed raised rates against the backdrop of a growing economy, and cyclical sectors, notably technology, significantly outperformed; but the other two-thirds of rate hikes came when the economy was slowing, and defensive sectors provided better performance, led by health care.”
Therefore, Nielson said the impact of rising rates on defensive sectors should be considered in the context of whether economic growth is accelerating or slowing.
“Examining factor returns, both value and small-cap strategies tend to outperform when rates rise, albeit for different reasons – value because higher interest rates usually reflect a healthier economy, and small-cap because those companies tend to be U.S.-focused and less susceptible to a stronger dollar,” he said.