New ETF portfolio manager enters market

06-Sep-2013

By Krystine Lumanta

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New online entrant Stockspot is preparing to release model portfolios based on exchange-traded funds (ETF) for retail investors and self-managed superannuation funds (SMSF) in the coming months.

Stockspot founder Chris Brycki said the growth and accessibility of ETFs had opened up an opportunity for the business to step into the sector and provide Australians with a better way to invest.

“When it comes to ETFs, people don’t know which the best in each asset class is and there’s a few out there now, so it’s difficult for them to understand,” Brycki told financialobserver.

“We’ll construct portfolios for people across multiple assets, including Australian shares, international shares, emerging markets, bonds, metals and properties, using ASX-listed ETFs that are already available, and for each of those asset classes we’ll pick the best ETF and constantly review them.

“My feeling is that ETF adoption by retail investors and SMSFs will rapidly accelerate over the next few years [because], as you know, $8 billion is still only a drop in the water compared to the $2.1 trillion of investment assets in Australia.”

The company website was launched this week and had over 1200 views up until yesterday.

Brycki, a former UBS portfolio manager, said Stockspot would approach its ETF model portfolios using individuals’ risk tolerance.

“If you can understand the volatility of each asset class, their performance over time and the cross-correlation, you can combine asset classes to create portfolios to match different risk levels,” he said.

“To start we’ll have a set number of model portfolios.

“Using our back-testing, we’ve worked out about five to seven portfolios will cover the main groups of risk classes. As we grow, we’ll try to personalise it even further.”

The company is currently in discussions to finalise its partners.

“We’re working out the best partners for the execution side and also the administration platform side for the back end of our website, so we’re speaking to four to five groups on each of those areas,” Brycki said.

“We’re hoping to finalise the look and feel of the product within the next month and hopefully have it up and running not too long after that.”

He said while ETFs were emerging in the local market, their market share was still small.

“That largely has to do with how the funds management industry is controlled – the vertical integration of the banks through their wealth management distribution channel,” he said.

“But we’ve seen it in media and in shopping that more and more people are embracing online and I think that will also [be the case] for investing over the next five years.”

Advisers, brokers, research houses as well as some SMSF investors had shown interest in Stockspot’s ETF-based model portfolios, he said.

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