Research drives ETF model portfolio trends


By Daniel Paperny

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Financial advisers are increasingly seeking expertise in building robust portfolios for clients using exchange traded funds (ETFs), according to State Street Global Advisors (SSGA).

Speaking at a media event in Sydney yesterday, SSGA Australia head of SPDR ETFs Shaun Parkin said advisers should be aware of various strategies used to build an effective ETF managed portfolio, including the differences between strategic and tactical asset allocation.

“What we’re finding is that over the last 12 to 18 months Australian advisers and investment groups are looking to expertise outside of their own business,” Parkin said.

“They’re looking at asset allocation as a strategy they’re increasingly interested in or that their clients are asking for.

“What they’re looking to do is get very research-driven and robust processes around diversification, and using ETFs [to achieve that].”

Parkin said the trend of ETF model portfolio construction had “grown exponentially over the last five to six years”, and in the United States smaller, independent fund managers in particular were benefiting from it.

“There was a bit of movement away from those independent, boutique operations in the US to larger businesses like ours and our competitors in the asset allocation space, and now we’re seeing that emerging in Australia as well,” Parkin said.

SSGA Investment Solutions Group head of strategy and research in Asia Pacific Thomas Poullaouec noted four key benefits for advisers in using an ETF model portfolio for their clients.

These comprised transparent investment recommendations, model portfolio advice, best in class implementation and knowledge transfer via SSGA’s monthly commentary, which he said could lead to better adviser investment decisions and more informed choices for their clients.

“By having this packaged solution, advisers can know whether we prefer certain sectors, countries and markets, and can implement that in their portfolio, as well as be aware of investment trends and themes,” Poullaouec said.

“We are not only generating trade ideas but forming a complete view of the portfolio and also recommending the ETF they should try to implement this with.”

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