Morningstar Advisor - December 2012/January 2013 - (Page 44)

Spotlight Where to Research ETF Managed Portfolios by Andrew Gogerty Morningstar is committed to leading the industry’s research and analysis of ETF managed portfolios with the goal of helping advisors better understand the strategies. The best place to start is the new ETF Managed Portfolios Center onMorningstarAdvisor.com. For financial advisors and other key decisionmakers this center provides information, analysis, and education around ETF strategies. Registered users have access to a proprietary screener to focus their search for one or more potential ETF strategists and portfolios. More custom research and analytics are available through Morningstar’s research platforms (Morningstar Direct, Morningstar Office, and Morningstar Advisor Workstation). The ETF Managed Portfolio Center features video content discussing trends and perspectives from asset managers, ETF providers, and other industry executives. The center also hosts a forum for ETF strategists to post their commentary and perspectives and short educational slideshows for those getting started with these investments. Morningstar also will be publishing regular commentary on ETF managed portfolios, including our perspective on ETF strategist firms and strategies in Morningstar’s database. Also available on MorningstarAdvisor.com is the “ETF Managed Portfolios Landscape Report.” First issued in January 2012 and updated in September, the report offers a comprehensive look at the strategies in Morningstar’s database and includes information on various risk metrics, asset growth analysis, performance rankings and comparisons, and Morningstar’s perspective on current industry trends. Andrew Gogerty is an ETF managed portfolio strategist with Morningstar. able Rate of Return) strategies have also seen significant growth and rank among the largest strategies in this universe. Give Me Some Action! Driven by growth in both the Global All-Asset and U.S. Equity space, total assets in pure tactical strategies have inched past those in hybrid offerings through midyear. Overall, though, the Portfolio Implementation profile of the ETF-managed-portfolios space has remained relatively stable, with Hybrid and Tactical strategies each controlling approximately 45% of assets—with the remaining 10% in Strategic offerings. In fact, Tactical strategies have been the primary beneficiaries of investors’ appetites in the U.S. equity space. Strategies from Good Harbor, F-Squared, and Innealta have enjoyed the lion’s share of the growth in the domestic-equity segment and also rank among the fastest-growing of all strategies in the space. allocation. Hybrid portfolios, for example, start with a stated investment policy benchmark or asset allocation but allow for significant deviations of exposure within and between allocations, similar to a “core and satellite” or “hub and spoke” operating model. Promise of Technology Perhaps the biggest trend in ETF managed portfolios is the promise of technology. Technology will continue to redefine the money-management industry. We see that in ETFs now. They’re technology solutions, not funds. Not only do ETFs provide global access to investment opportunities, but their on-exchange structure democratizes investing; the conflicts present in other investment vehicles don’t exist here. Advances in technology—whether it is the UMA structure, portfolio overlay services, or simple outsourcing of investment management duties to ETF strategists— will allow advisors to focus on the core of their business and clarify their value proposition to clients. If advisors have access to technology that allows them to provide better, more efficient portfolios to clients, they have the power to redefine their client-relationship role. K Andrew Gogerty is an ETF managed portfolio strategist with Morningstar. Assets by Portfolio Implementation Type Hybrid Tactical Strategic 50% 40 30 20 10 Q4 2011 Data as of June 30, 2012 Q1 2012 Q2 2012 This makes sense, as the value proposition of many strategies includes the promise of a “better mouse trap” for allocating assets among sectors or asset classes. Hybrid strategies often include a combination of tactical and strategic elements in asset 44 Morningstar Advisor December/January 2013 http://www.MorningstarAdvisor.com http://www.MorningstarAdvisor.com

Table of Contents for the Digital Edition of Morningstar Advisor - December 2012/January 2013

Morningstar Advisor - December2012/January 2013
Contents
Contributors
Letter From the Editor
What Stands Between Me and Stupid
Why Do You Use Dynamic Funds of Funds?
Serving Clients and Community
How to Pick an ETF Managed Portfolio Strategy
Tactical View of Risk
Investments á la Carte
Investment Briefs
Unbundling ETF Managed Portfolios
Risks Loom Over Telecom Industry
Outsourcing Asset Allocation
ETF Managed Portfolios on the Rise
Age-Based Options Take Over 529 Industry
How the Landscape for Advisors Is Changing
Mark Egan Embraces Volatility
Alpha, Beta, and Now … Gamma
Performance Gaps
Gains in Momentum
Companies Where Management Teams Add Value
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Once and Future King

Morningstar Advisor - December 2012/January 2013