2023 was a major year for ETFs, and in 2024, the wrapper looks set to take another big leap. Among the various issuers in that landscape, few firms take as intriguing an approach as Natixis Investment Managers does. The firm partners with affiliates with various specializations, providing a suite of specialist ETFs for investors.
See more: ETF of the Week: Natixis Vaughan Nelson Select ETF (VNSE)
For example, the firm recently partnered with affiliate Gateway Investment Advisers to launch the Natixis Gateway Quality Income ETF (GQI) in December. GQI has also outperformed its Factset Segment Averages on a YTD basis.
VettaFi sat down with leaders from both firms to discuss their overall outlook at last month’s ETF Exchange conference. Natixis head of ETFs Nick Elward and Gateway Investment Strategist Joe Ferrara shared their thoughts on the overall Natixis suite.
“We start with a basket of high-quality stocks,” Ferrara said regarding the approach to GQI. “At the Gateway, we’re not fundamental analysts; we’re not bottom up. We’re looking for the highest-quality businesses within the S&P 500. We’re trying to build a portfolio of 75 to 125 names with low to no debt, high ROE, high ROA, no leverage, that can grow on the upside and generate cash flow.”
Ferrara added that the strategy focuses on strong businesses. That helps the ETF limit downside while offering an option writing program on half the portfolio to generate income. Together, that approach offers an 8 to 12% annualized yield, distributed monthly as of February.
Natixis and its Affiliate Model
The strategy presents an intriguing alternative to fixed income, for example, for those investors who still don’t see bonds operating at their best.
“A product like ours, you can get again, that kind of 8 to 12% yield, fixed income-like replacement even, but without the interest rate sensitivity of an actual bond or a corporate bond or something like that,” Ferrara said. “There are people that need yield, looking for yield, that want income but the fixed income market isn’t operating the way it used to.”
Natixis’ multi-affiliate model could boost its ability to offer value-added services to advisor clients. Its affiliate model helps set Natixis apart from other firms, Elward said.
“The multi-affiliate model is certainly something that makes us unique in that we have experts in very different asset classes that can be brought to bear for the financial advisor,” Elward said. “It’s nice to have one key contact. That would be your Natixis relationship manager.”
The main focus, another asset for advisors working with Natixis, comes from the firm’s focus on portfolio construction.
“The main theme that we’re thinking about for this year is just the importance of asset allocation and portfolio construction,” he said. “Not just equity and fixed income, but also alternatives and liquid alts is something that I think more of our experts are thinking about.”
Elward said the firm is among the first to create a portfolio construction team, including CFAs. Those CFAs aim to help advisors and small institutions with their models and optimize their holdings better.
With strategies like GQI and short-duration ETFs like the active Natixis Loomis Sayles Short Duration Income ETF (LSST) available to investors, which also comes from an affiliate, the firm’s model and emphasis on model allocation may appeal to curious investors this year.
For more news, information, and analysis, visit the Portfolio Construction Channel.