The ETF Strategist: What They Can Offer
In our discussions with investors, we consistently get questions about the ETF strategist – what do they do, and how do they help investors and investment advisors?
What Is an ETF Strategist?
ETF strategists are Registered Investment Advisors (RIAs) who build portfolios for clients and financial advisors where ETFs1 are underlying investments in either portfolios or investment models. These ETF strategists often run several asset allocation models for investors to choose from, ranging from conservative, balanced, and growth-oriented to more specialized models. Client accounts are usually set up so the ETF strategist can execute trades in and out of the underlying ETFs. Alternatively, the strategist may simply send recommended model trades to brokerage firms who conduct trading for the end investor.
What Benefits Do ETF Strategists Offer to End Investors?
As ETFs are generally thought to be more tax-efficient vehicles than mutual funds, by investing primarily in ETFs, strategists may enhance a portfolio’s tax efficiency. As such, ETF strategists can be tactical with their asset allocation decisions, adjusting allocations frequently without risking tax implications. This may include holding a large cash allocation when markets appear overvalued or risky.
“Active asset allocation moves between asset classes, sectors, countries, and cash,” advises Stringer Asset Management’s Chief Investment Officer Gary Stringer, “are the primary drivers of investment results. Helping investors with these broad and impactful decisions is a primary value offered by ETF strategists.” This active asset allocation approach can potentially deliver a valuable source of portfolio returns and material portfolio protection amid market declines. The potential risks and rewards depend in large part on the ETF strategist’s trading decisions.
What Benefits Do ETF Strategists Offer to Financial Advisors?
Some financial professionals outsource their clients’ asset allocation decisions to an ETF strategist. This can afford the advisor more time to focus on growing their business or undertaking other client-related activities like financial planning or estate planning. Importantly, in cases where asset allocation is not the advisor’s area of expertise, advisors offer their clients a stronger investment value proposition by outsourcing this function.
Eric Biegeleisen, CFA®, Partner, Deputy Chief Investment Officer of 3EDGE Asset Management, affirms, "Increasingly we’re finding that advisors want to outsource their investment management to firms focused on diversification and downside risk protection. This provides them the ability to better service their clients’ needs."
What Types of ETFs Do Strategists Use to Build Their Models?
Many ETF strategists have historically used pure passive ETFs, or possibly smart beta ETFs,2 as the building blocks in their ETF strategist models. Currently, we’re seeing ETF strategists increasingly use active ETFs especially given the growing number of these products available in the market. Actively managed ETFs provide investors two opportunities to outperform, through both asset allocation decisions and security selection decisions.
We hope this summary provides a clear view of how these investment professionals can enhance portfolio returns and advisors' business development efforts. We will continue to bring you innovative ideas for active ETFs and insights on relevant ETF market topics.
1 An exchange-traded fund, or ETF, is a marketable security that tracks an index, commodity, bonds, or a basket of assets like an index fund. ETFs trade like common stock on a stock exchange and experience price fluctuations throughout the day as they are bought and sold.
2 Smart beta refers to an investment style where the manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. Smart beta strategies involve risk, including risk of loss.
Exchange-traded funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than the ETF's net asset value. Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns. Active ETFs: Unlike typical exchange-traded funds, there are no indexes that an active ETF attempts to track or replicate. Thus, the ability of an active ETF to achieve its objectives will depend on the effectiveness of the portfolio manager. Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
Neither Stringer Asset Management nor 3EDGE Asset Management and Natixis Investment Managers are affiliated.
CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Diversification does not protect against loss.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
Before investing, consider a fund's investment objectives, risk, charges, and expenses. Visit im.natixis.com for a prospectus or a summary prospectus containing this and other information. Read it carefully.
What Is an ETF Strategist?
ETF strategists are Registered Investment Advisors (RIAs) who build portfolios for clients and financial advisors where ETFs1 are underlying investments in either portfolios or investment models. These ETF strategists often run several asset allocation models for investors to choose from, ranging from conservative, balanced, and growth-oriented to more specialized models. Client accounts are usually set up so the ETF strategist can execute trades in and out of the underlying ETFs. Alternatively, the strategist may simply send recommended model trades to brokerage firms who conduct trading for the end investor.
What Benefits Do ETF Strategists Offer to End Investors?
As ETFs are generally thought to be more tax-efficient vehicles than mutual funds, by investing primarily in ETFs, strategists may enhance a portfolio’s tax efficiency. As such, ETF strategists can be tactical with their asset allocation decisions, adjusting allocations frequently without risking tax implications. This may include holding a large cash allocation when markets appear overvalued or risky.
“Active asset allocation moves between asset classes, sectors, countries, and cash,” advises Stringer Asset Management’s Chief Investment Officer Gary Stringer, “are the primary drivers of investment results. Helping investors with these broad and impactful decisions is a primary value offered by ETF strategists.” This active asset allocation approach can potentially deliver a valuable source of portfolio returns and material portfolio protection amid market declines. The potential risks and rewards depend in large part on the ETF strategist’s trading decisions.
What Benefits Do ETF Strategists Offer to Financial Advisors?
Some financial professionals outsource their clients’ asset allocation decisions to an ETF strategist. This can afford the advisor more time to focus on growing their business or undertaking other client-related activities like financial planning or estate planning. Importantly, in cases where asset allocation is not the advisor’s area of expertise, advisors offer their clients a stronger investment value proposition by outsourcing this function.
Eric Biegeleisen, CFA®, Partner, Deputy Chief Investment Officer of 3EDGE Asset Management, affirms, "Increasingly we’re finding that advisors want to outsource their investment management to firms focused on diversification and downside risk protection. This provides them the ability to better service their clients’ needs."
What Types of ETFs Do Strategists Use to Build Their Models?
Many ETF strategists have historically used pure passive ETFs, or possibly smart beta ETFs,2 as the building blocks in their ETF strategist models. Currently, we’re seeing ETF strategists increasingly use active ETFs especially given the growing number of these products available in the market. Actively managed ETFs provide investors two opportunities to outperform, through both asset allocation decisions and security selection decisions.
We hope this summary provides a clear view of how these investment professionals can enhance portfolio returns and advisors' business development efforts. We will continue to bring you innovative ideas for active ETFs and insights on relevant ETF market topics.
2 Smart beta refers to an investment style where the manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. Smart beta strategies involve risk, including risk of loss.
Exchange-traded funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than the ETF's net asset value. Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns. Active ETFs: Unlike typical exchange-traded funds, there are no indexes that an active ETF attempts to track or replicate. Thus, the ability of an active ETF to achieve its objectives will depend on the effectiveness of the portfolio manager. Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
Neither Stringer Asset Management nor 3EDGE Asset Management and Natixis Investment Managers are affiliated.
CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Diversification does not protect against loss.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
Before investing, consider a fund's investment objectives, risk, charges, and expenses. Visit im.natixis.com for a prospectus or a summary prospectus containing this and other information. Read it carefully.
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