Exchange traded fund managed portfolios are picking up their pace in the separate accounts space as more financial advisors look to simply their advisory businesses and incorporate targeted ETF-based investment strategies.
As of the end of the third quarter of 2017, where there were 1,093 strategies from 179 firms with total assets of $115 billion, or total assets up 7.5% in the third quarter of 2017, according to Morningstar data.
Morningstar also pointed out that some $4 billion of the quarter-over-quarter jump in assets was driven by new additional investment strategies into their database, which reflects the ongoing developments in this relatively nascent segment of the financial industry. Meanwhile, organic growth contributed the remaining $4 billion in new assets over the three month period, with assets overseen by the 25 largest firms rising by almost $6.2 billion over the quarter.
Vanguard retained its dominant position, collecting $9.1 billion in new assets in the three months through September 2017.
Among the 20 strategies with the largest quarter-over-quarter increase in assets, five were vanilla stock or bond strategic asset-allocation or long-term portfolios, which reflects the ongoing shift of investor preferences that was initially spurred by the decline in high-flying tactical strategies.
The largest ETF managed portfolios assets by firms as of the end of September 2017 include Vanguard Advisors $9.1 million, Windhaven Investment Managed $8.0 million, BlackRock $7.2 million, RiverFront Investment Group $6.4 million and State Street Global Advisors $5.6 million.
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.