Managed portfolios which invest primarily in ETFs are continuing to grow as use of ETFs among individuals and institutions becomes more widespread.
The growth of these strategies has been taking place for a number of years but there is limited information on how far it has gone.
Morningstar is collecting information, starting in the US market; it currently has 330 strategies in its data base, with assets under management exceeding $22bn. More than 30% of those have been launched in the last three years.
The number of new strategies has slowed, however: "What you are seeing is assets continue to flow to these strategies as financial advisers and institutions are using ETFs as a core part of their investment process," says Andrew Gogerty, ETF managed portfolios strategist at Morningstar.
"What's different about these strategies is a lot of managers are actively managing these exposures... they are trying not only to outpace a standard market index but they are also trying to protect assets on the downside and take advantage of compounding of returns."
Gogerty expects the use of strategies which invest primarily in ETFs to continue growing as managers and advisors become more comfortable with using them.
"Investment strategies built around tactical and strategic use of ETFs are the next logical step in the evolution of ETF use and bridge the gap between the passive, market exposure value proposition of ETFs and true active management," says Gogerty.
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