After losing momentum over 2016 in the separate accounts space, exchange traded fund managed portfolios gained a greater following over the first quarter this year.
As of the end of the first quarter 2017, there were 950 ETF managed portfolio strategies from 169 firms with total assets of $99.7 billion, up 17.6% since the fourth quarter of 2016, according to Morningstar data.
A significant increase in assets – approximately $8.8 billion of the $14.9 billion quarter-over-quarter increase – was driven by the addition of new strategies, like Columbia, onto the Morningstar database, which suggests that more players are entering the separate accounts space with new ETF managed portfolio strategies.
Furthermore, the three largest ETF providers now occupy three of the five top spots in the ETF managed portfolio landscape. Vanguard, RiverFront, State Street and BlackRock added a collective $2.3 billion in assets to strategies that had been previously included in Morningstar’s database.
The largest ETF managed portfolios assets by firms as of the end of March 2017 include Windhaven Investment Managed $8.46 million, Vanguard Advisors $6.40 million, RiverFront Investment Group $5.83 million, State Street Global Advisors $5.54 million and BlackRock $5.01 million.
Morningstar also found that seven of the 20 strategies with the largest quarter-over-quarter increase in assets were vanilla stock and bond strategic asset allocation portfolios, which reflects the ongoing shift of investor preferences that was initially spurred by the decline in high-flying tactical strategies.
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Fueling demand for ETF managed portfolios, clients are actively asking multi-asset managers to increase ETF allocations in their portfolios. Managers are also expanding their investment base with ETFs to meet specific goals. More active managers are also adopting ETFs due to the many benefits of the investment vehicle, such as low fees, deep liquidity, tax efficiency and as replacements for futures and to access broad asset classes.
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.
For more information on the separate accounts space, visit our ETF managed portfolios category.