Active Strategies in a Passive, Smart Beta ETF Wrapper | ETF Trends

Seasoned money managers have adapted their asset management styles into exchange traded funds to help investors gain exposure to time-tested strategies.

“We are focused on porting our active insights into what we do on the passive side, and what differentiates us is that we will recruit the actual PM on that active mandate to help us build the rules behind that passive solution,” Marc Zeitoun, Head of Strategic Beta, Columbia Threadneedle, said at the Inside ETFs conference.

For example, the Columbia Diversified Fixed Income Allocation ETF (NYSEArca: DIAL) follows an alternative indexing methodology to potentially help bond investors garner improved returns and likely diminish the negative effects of sudden swings.

Unlike traditional market cap-weighted indexing methodologies, DIAL follows a customized, rules-based index that incorporates Columbia Threadneedle’s unique touch.

The bond ETF tries to reflect the performance of the Beta Advantage Multi-Sector Bond Index, a rules-based multi-sector strategic approach to debt market investing. The underlying smart beta index covers six sectors of the debt market. The result is an index customized for each sector, optimizing for yield, quality, and liquidity with monthly rebalancing discipline to manage drift.

Additionally, the Columbia Multi-Sector Municipal Income ETF (NYSEArca: MUST), which tracks the Beta Advantage Multi-Sector Municipal Bond Index, is another way for investors to broaden their opportunity set and gain exposure to a more effective tool to implement a passive muni solution. MUST could help complement a traditional approach to municipal bond investing and improve investor outcomes. The smart beta methodology leans toward potential opportunity as opposed to conventional market cap-weighting or indebtedness. As a result, the portfolio takes a more active approach to enhance yield and generate improved risk-adjusted returns over traditional municipal benchmarks while following a passive, rules-based indexing methodology.

Watch Marc Zeitoun Discuss Adapting To Strategies:

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