Wealth Advisor Magazine February 2024 Edition - 17

difference. Even the asset management
complexes that once distributed their
ideas only through managed accounts
and proprietary fund placements are
now opening up to the exchange-traded
mindset.
An ETF-oriented advisor can now
get access to exclusive strategies from
Dimensional Fund Advisors (DFA),
AllianceBernstein, Goldman Sachs Asset
Management (GSAM), and more, without
sacrificing diversification or meaningful
performance. If anything, the legacy 40
Act equivalents can be less efficient in
terms of both fee drag and tax treatment.
But the goal is as simple as it gets.
These shops already pioneered worldclass
trading and portfolio construction
systems designed to squeeze alpha out of
every possible opportunity. Why not package
them in a format that meets advisors
wherever they happen to be?
" It works largely the same way that it
does in a mutual fund or if we're doing
it in a separately managed account, " Wes
Crill, senior investment director at DFA,
tells me. " The only difference is how the
liquidity is serviced, with investors buying
mutual funds interacting directly with us
while people buying ETFs are going to
interact mostly in the secondary market. "
Example: DCOR, otherwise known
as the legendary Dimensional US Core
Equity strategy. Full market exposure and
then overweight smaller, cheaper, and
more profitable stocks that can outperform
the rest. Simple. Differentiated. Now
available to all.
Likewise, the insights that were once
exclusive to Goldman Sachs clients are
now publicly traded on the open market
where one and all can get a taste. You can
be a Goldman Sachs partner. They don't
actually mind.
And they keep innovating, bringing
out smarter cores of their own in the
form of GPIX to improve on the S&P
500 and GPIQ to challenge the Nasdaq.
The approach is classic but once upon a
time would have been reserved for elite
investors: Goldman traders layer options
around each index to generate current
income.
They're brand new on the market. You
can be early in the game. And the level of
sophistication involved means that even if
you could do it yourself with some degree
THEWEALTHADVISOR.COM
YEAR: BETTER CASH
A
llianceBernstein is known for a lot more than " ETF " innovation, but Noel Archard
vows to make that happen in the near future. After all, he's head of the $725 billion
behemoth's exchange-traded fund unit, converting legendary active management strategies
that formerly lived only in 40 Act world and in separately managed accounts (SMAs).
All he wants is to meet advisors where they are. If you run SMAs, AB is there. If you
prefer traditional mutual funds, AB has a massive footprint. And now those strategies
are rolling out here in the ETF market.
As always, the moves are strategic. One of the most interesting is YEAR,
which invests in short-term paper in search of the best yields possible.
It's a cash vehicle, obviously. Right now, cash yields rule . . .
but Archard notes that the short end of the curve can swing fast
when the pendulum swings. That's why YEAR is actively managed.
They aren't content to simply keep rolling over money
market instruments.
For your clients, that might just be the holy grail. Archard
tells me flows across the dividend space are rising as investors
finally see yields worth chasing. YEAR gives advisors a
way to manage cash and justify the fees.
And if you want to know how to bring that slice of the portfolio
into your AUM, AB is there for education and coaching.
" We have an advisor institute, " Archard says. " As their
businesses grow, our business grows. "
The last yield I saw quoted on YEAR was
5.5%. Not bad at all.
NOEL
ARCHARD
of confidence, you probably wouldn't
want to.
Why now? Everything is interconnected
over at Goldman.
" Our multi-asset division is calling for
single-digit returns, and I think everyone
realizes markets may be sideways for
some time, " says Brendan McCarthy, head
of GSAM ETF specialists and capital markets.
" So, what we're trying to do with this
product is generate stable income. "
Of course, classic closed-end funds
(CEFs) have done something similar in
the past. The innovation here is what the
Goldman trading desk does with the idea
. . . and how the results fit into the ETF
wrapper.
Again, it's all about finding ways to
beat the benchmark, believe it or not. The
random walk is what it is. It's table stakes.
For a different take on the CEF to ETF
approach, take a look at YYY from Amplify.
It's a fund of CEFs, each of which,
firm founder and CEO Christian Magoon
tells me, pays at least an 11% distribution
that the fund then passes on to its own
investors. And the underlying CEFs still
trade at a collective discount of 10%.
" There could be a really great tactical
play here for investors who need high
current income today but also want to
position themselves for the discount reverting
to historical average levels, which
could be another 4.5-5% return, " he says.
Consistent income today, like a conventional
bond allocation. Capital appreciation
tomorrow, like a stock. What's not to
love?
And a third approach comes from
GraniteShares, which collects passthrough
securities-such as MLPs, REITs
and BDCs-into a single exchange-traded
portfolio. HIPS carries a quoted distribution
rate of 10.75% a year, which is
enough to replace conventional equity
and still generate comparable long-term
returns.
Calculate all the basis points and
make your choice. From my perspective,
more distribution channels open to more
advisors is always a good thing. Give us
access to the keys to the castle and let
everyone pick the version that works best
for each client.
JANUARY / FEBRUARY 2024 | 17
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Wealth Advisor Magazine February 2024 Edition

Table of Contents for the Digital Edition of Wealth Advisor Magazine February 2024 Edition

Wealth Advisor Magazine February 2024 Edition - 1
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