ETF Model Portfolio Provider Symposium - ETF.com
47
Monday, February 11, 2013 ETF Model Portfolio Provider Symposium
Transcript of ETF Model Portfolio Provider Symposium - ETF.com
Monday, February 11, 2013
ETF Model Portfolio Provider Symposium
Presenter
Presentation Notes
Hi, and welcome to this special session, the ETF Model Portfolio Provider Symposium.
ETF Model Portfolio Provider
Symposium
Matt Hougan, Session Leader President of ETF Analytics & Global Head of Editorial IndexUniverse
Katharine Earhart, Session Leader Director, Head of iShares Connect BlackRock
Participating Firms Astor Asset Management Boston Advisors Clark Capital Management Group CLS Capital Efficient Advisors Integrated Capital Management iSectors JA Forlines Global RiverFront Investment Group Wela Strategies
Presenter
Presentation Notes
My name is Matt Hougan. As most of you know by now, I am the Global Head of Editorial and President of ETF Analytics for IndexUniverse, the host and organizer of this conference. I’m pleased to be joined onstage here by Katharine Earhart. Katharine is a director and the head of the iShares Connect program within BlackRock's Global Client group. iShares Connect is really, to my mind, the reason we’re all here today. It – more than anyone else --- really helped jumpstart the whole ETF Investment Strategist boom, starting in 2008, when it launched the iShares Connect Guide, highlighting firms using ETFs to build portfolio exposures and working to connect them to advisor clients. Katharine knows more about this space than almost anyone in the world, and it’s been a real pleasure partnering with her and her team at iShares Connect to organize today’s symposium.
3 Parts
Presentation ETF Model Portfolio Providers: The Next Wave of Growth 4:55 – 5:25pm
Roundtable Discussions Answering Your Questions 5:25 – 5:55pm
Panel Discussion Building Portfolios in a Challenging Environment 5:55 – 6:35pm
Presenter
Presentation Notes
Today’s Symposium will take place in 3 parts. To kick things off, Katharine and I will present our own perspectives on the growth of the model portfolio provider space. We’re going to keep it a little loose and make it a little fun, because it’s been the end of a jam-packed day and because that’s the way it should be. Second, we move into the roundtable part of the session. At each of the tables you are seated at, you will find two very important things. First, and most importantly, there is beer. And wine. And snacks are available throughout the room. I encourage you all, right now, to reach over, open those beers. Don’t be shy about interrupting us with the sound of a beer opening; that’s what the session is all about. Secondly, at each table, there is a bonified ETF Model Portfolio Provider. Together with Katharine, we’ve selected 10 of the leading firms in this space to be here in this room. These guys are the best of the best; among our favorites. And during the roundtable phase, representatives from these firms will lead a discussion at each table where you can dig into the nitty-gritty of how they approach the market and the challenges they face in building portfolios. Then, at 5:55, I call everyone back together for the last part of the day – a panel discussion that I will moderate with 3 of the providers talking big picture about this space, their portfolios, and what to watch out for if you choose to work with a model provider.
Why We Are Here Today?
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
Why Are We Here Today?
Based on back tested results, train travel in the Wild, Wild West was utterly safe.
Pay no attention to the man on top of the train.
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2009, The Market Was…
Up?
Essentially Flat?
Down?
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2009, The Market Was…
Up --- 28%
Essentially Flat --- 21%
Down --- 45%
The S&P 500 actually closed the year up
26.5%
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2010, The Market Was…
Up Significantly?
Up Slightly?
Essentially Flat?
Down Slightly?
Down Significantly?
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2010, The Market Was…
Up Significantly --- 14%
Up Slightly --- 36%
Essentially Flat --- 23%
Down Slightly --- 14%
Down Significantly --- 12%
The S&P 500 was actually up 15.1%
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2011, The Market Was…
Up Significantly?
Up Slightly?
Essentially Flat?
Down Slightly?
Down Significantly?
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
In 2011, The Market Was…
Up Significantly --- 4%
Up Slightly --- 26%
Essentially Flat --- 34%
Down Slightly --- 22%
Down Significantly --- 14%
The S&P 500 was actually up 2.1%
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
The Rise of ETF Model Portfolio Providers
-47%
-37%
-27%
-17%
-7%
3%
13%
23%
33%
03/01/2000 08/02/2013
Tota
l Ret
urn
Asset Class Weight Fund Ticker ER
U.S. Equity 30% Vanguard Total Market VTI 0.05%
Developed Equity 20% iShares Core MSCI EAFE IEFA 0.14%
Emerging Markets Equity 10% iShares CORE MSCI Emerging Markets IEMG 0.18%
U.S. Fixed Income 15% iShares U.S. Aggregate Bond SCHZ 0.08%
Developed Fixed Income 5% iShares S&P/Citi International Treasury IGOV 0.35%
Emerging Markets Fixed Income 5% Market Vectors Emerging Market Local
Currency ELD 0.55%
REITs 5% Vanguard REIT VNQ 0.10%
Commodities 5% PowerShares DB Commodity DBC 0.75%
All-In Costs 0.16%
The 16 BPS ETF Portfolio
Presenter
Presentation Notes
And it’s this. I have this wonderful portfolio that I like to show on my website – I call it the cheapest ETF portfolio in the world. It holds the cheapest ETF in each of 6 areas of the market, at aggressive weights, and boasts a combined annual expense ratio of 0.09% per year. It’s similar – not identical, but similar – to my own personal portfolio. The actual ETFs you own here are not that important. You could swap out iShares or Vanguard for the core equity and bond ETFs; and you should swap out DJCI for a better commodity ETF, like DBC or UCI. But the point is you can get this enormously diversified exposure for essentially nothing. And I raise that because it’s worth keeping in mind. This is bogey that the tactical managers we will meet today have to beat – or tweak, to supply a different kind of return. Because if they can’t do this, why bother? I think they can – I love many of the providers in this space, and think some of the most famous investors of the next 10 years will be drawn from this room. But it’s worth remembering the alternative that they’re pulling against, because that matters too. And with that, I’d like to turn it over to Katharine Earhart. Katharine?
ETF Model Portfolio Providers: The Next Wave of Growth
What Advisors Should Know
Today’s Hosts
Matt Hougan President of ETF Analytics & Global Head of Editorial IndexUniverse
Katharine Earhart Director, Head of iShares Connect BlackRock
ETF Model Portfolio Providers Astor Asset Management Boston Advisors Clark Capital CLS Investments Efficient Advisors Integrated Capital Management iSectors JA Forlines Global RiverFront Investment Group Wela Strategies
Trends: ETF Investment Strategists
Growth in the Space
$5.8B
$16.9B $28.0B
$38.0B $46.0B
$54.0B
$120.0B
0
20
40
60
80
100
120
140
0
100
200
300
400
500
600
2008 2009 2010 2011 Q12012
Q32012
2015(est)
Tota
l Ass
ets
Num
ber o
f ETF
Inve
stm
ent S
trat
egis
ts
Total Assets Number of ETF Investment Strategies
* Source: The Guide to ETF Investment Strategists, 12/08–3/12.
The ETF Investment Strategist Sector: Cerulli Associates recent report “ETFs and
Retail Alternative Products and Strategies 2012” has stated that “ETF assets are expected to quadruple to $3.8 trillion by end of 2016.”
“Morningstar is currently tracking 506 strategies from 120 firms with collective AUA of $57 billion as of September 2012 – representing 45% YTD growth and 65% over the last 12 months.” (Morningstar’s ETF Managed Portfolios Landscape Report, January 2013)
iShares projects $120B in ETF Assets in the Connect Program by end of 2015; current ETF Assets are at $54B as of Q3 2012.
Total Assets and Number of ETF Investment Strategists*
ETF Strategies Across Vehicles Managed Account Assets and Growth Rates by Program Type
510 535 7 321 381 80
580 690
14
448 516
140
597 706
15
508 547
180
595
698
16
515 543
182
$
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Separate AccountConsultant Programs
Mutual Fund AdvisoryPrograms
ETF AdvisoryPrograms
Rep as PortfolioManager
Rep as Advisor Unified ManagedAccounts
2Q 2010 2Q 2011 1Q 2012 2Q 2012
10.0%
YOY Growth Rates
Source: The Cerulli Edge: Managed Accounts Edition, 3Q 2012. Source: Cerulli Associates.
2.5%
1.1%
14.3% 5.2%
29.5%
ETF Strategies Across Asset Classes
6,343
1,449
8,815
7,179
1,845
10,999
6,925
1,905
12,550
7,826
2,121
14,200
0
3,000
6,000
9,000
12,000
15,000
Global International United States
Q4 2011 Q1 2012 Q2 2012 Q3 2012Assets USD Mil
Equity strategy Assets
Source: Morningstar ETF Managed Portfolios Landscape Report – Q3 2012. Source: Morningstar Inc.
Why Advisors are Turning to ETF Investment Strategists
Advisor
Marketing
Client Services
Asset Management
Reporting & Operations
Revenue Generating
Overhead Expense
Marketing and Sales New Business Acquisition Determining Objectives Servicing/Education
Asset Allocation Manager Selection Monitoring Managers Portfolio Rebalancing Reporting and Operations
RIAs indicate their biggest growth barrier is being
unable to devote sufficient staff time to business
development*
Advisor Challenges – Focus
* Source: Insights from the 2011 RIA Benchmarking Study from Charles Schwab.
23
Advisor Challenges – Time
37%
19% 8%
7%
7%
6%
6%
6% 3% 1%
Client Meetings Client AcquisitionsClient Servicing TradingResearch TrainingCompliance AdministrationOperations Other
Advisor Time Allocation
Source: Cerulli Associates, Dec 2011.
Internal Demands: Increasing complexity Decreasing margins and
increasing costs [ ]
Increased level of diversification [ ]
External Demands: Increased client demands Need to focus more time
Presenter
Presentation Notes
Internal Demands: Increasing complexity and time demands �of portfolio construction, monitoring and rebalancing. Decreasing margins and increasing costs, especially labor costs for investment professionals. Need to provide clients with an increased level of diversification difficult to achieve using internal resources.� External Demands: Increased client demands for communication, education and information to help keep them informed. Need to focus more time on existing client relationships and business development.
How Do You Implement?
Do It Yourself Strategic Portfolio Allocation – Endowment Style Tactical Management Global Allocation Sector Rotation Country Rotation Down-Side Protection Long Only/Go to Cash Long Short
Fully Unconstrained Minimum Volatility
Outsource to an ETF Strategist
Advisor
Strategist
Strategist 1
Strategist
Strategist 2
Strategist 3
Strategist 4
Multiple Approaches
“Outsourced CIO” “Portfolio Completion”
“Multi-Strategist Portfolio”
ETF Strategist Access Options
Access Vehicles Separately Managed Accounts
Traditional Mutual Fund ETF of ETFs Model-Based
UMA Model-Based
Rep-as-PM
Ease Of Implementation Moderate Easy Easy Moderate Challenging
On-going Trade Execution Easy N/A N/A Easy Challenging
Performance Reporting Moderate Easy Easy Moderate Moderate
Client Conversations Moderate Easy Easy Moderate Moderate
Client Holdings Transparency Good Moderate Moderate Good Good
How Do You Choose an ETF Investment Strategist?
What Questions Should You Ask? Consistent Process? Size, Scale & Track Record? (GIPS? Back-tested?) ETF Knowledge and Expertise? Investment Strategy Meet Your Needs? Client Service Philosophy? Advisor Advocacy? Ease of access and implementation?
30
Role of Strategist
Provide ETF market analysis and trading expertise
Construct model portfolios of ETFs
Manage day-to-day research, trading and operations
Implement strategies
Role of Advisor
Manage client relationship and financial planning
Define investment objectives and strategy
Determine asset allocations and securities selection
Select ETF Strategist based on client need
ETF Strategist Solutions Complement an Advisor’s Practice
Presenter
Presentation Notes
So how can an ETF strategist solutions help you? Historically, advisors have been reluctant to place investment management responsibilities in another’s hands, especially if it is considered core to their value proposition. However, leveraging the expertise of ETF strategists is not an all-or-nothing proposition. By incorporating ETF strategist into their practice, advisors are able to do what they do best - work with clients to define their investment objectives – while the ETF strategist manager takes on the role of implementing the strategies. The ETF strategist managers’ credibility and track record help attract the attention of wealthy clients with large portfolios. The access to a transparent strategist manager selection and termination process also affords greater flexibility for the advisor.
Tools To Assist You
Index Universe Inside ETFs Conference ETF Analytics Upcoming coverage
iShares Connect The Guide to ETF Investment Strategists A Framework for Selecting an
ETF Strategist Advisors Turn to ETF Investment
Strategists
Morningstar
ETF Managed Portfolios Landscape Report ETF Managed Portfolio Screener How to pick an ETF Managed
Portfolio Strategy
The information is strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. The information is not intended to provide investment advice. Past performance does not guarantee future results. Investing involves risk, including possible loss of principal. Information in this material has been taken from trade and other sources considered to be reliable. We do not represent that this information is accurate and complete, and it should not be relied upon as such. ©2013 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners. iS-9171-0213
Disclaimers
Astor Asset Management Boston Advisors Clark Capital Management Group CLS Capital Efficient Advisors Integrated Capital Management iSectors JA Forlines Global RiverFront Investment Group Wela Strategies
ETF Model Portfolio Provider
Symposium Roundtable Discussions
Presenter
Presentation Notes
Thanks Katharine. I thought we covered a lot of great ground there. Now let’s get into the meat of the symposium. Seated at each table in the room here we have member of a model portfolio provider, drawn from this list of ten firms. I want to introduce them briefly to the room, and I’ll ask them to stand up when their firm name is called: Joining us from Astor Asset Management we have XXX, TITLE, and XXX, TITLE. Astor is an asset management firm based out of Chicago that manages approximately $X.X billion in assets, using a macroeconomic approach to tactical asset allocation. Also here today is Boston Advisors. Boston is an independent, quantitatively disciplined investment group that aims to provide consistent returns to large institutions and high-net worth individuals. Joining us from Boston Advisors are XX, TITLE, and XX, TITLE. Clark Capital, out of Philadelphia, Pennsylvania, is one of the leading ETF strategists in the world, and a name that comes up whenever I ask people for their favorite firms in the space. Joining us from Clark are XX, TITLE, and XX, TITLE. CLS Investments is an RIA based out of Omaha, Nebraska, that uses a risk budgeting approach to help manage investor portfolios. Joining us from CLS Investments is XX, TITLE, and XX, TITLE. Efficient Advisors is an independent RIA based out of Philadelphia, Pennsylvania, which uses sound asset allocation strategies to create tax-efficient portfolios for investors and advisors. Joining us from Efficient Advisors is XX, TITLE, and XX, TITLE. From the great state of Michigan we have Integrated Capital Management, an advisor offering independent wealth management services using well-designed ETF portfolios. Joining us from Integrated Capital we have is XX, TITLE, and XX, TITLE iSectors, from Appleton, Wisconsin, is an investment management firm that uses all-ETF portfolios based around sound asset allocation models to provide superior risk-adjusted returns. Joining us from iSectors is XX, TITLE, and XX, TITLE. JA Forlines Global provides private label portfolio management for clients of select RIAs, broker deals and registered reps, using a top-down macro view with a global orientation. Joining us from JA Forlines is XX, TITLE, and XX, TITLE. Riverfront Investment Group is a strategic, global asset manager with approximately $3 billion in assets under management. Joining us from Riverfront are XX, TITLE, and XX, TITLE. And finally, Wela Strategies is an Atlanta, Georgia based investment management firm that tailors portfolios based on investor risk tolerance, time horizon and return expectations. Joining us from Wela Strategies are XX, TITLE, and XX, TITLE. For the next 30 minutes or so, I’m going to get out of the way and let you all talk, at your tables, with the resident experts. Katharine and I may come around the room and listen in a bit, but mostly you can ignore us. When we have about 5 minutes to go, I’ll come back on-stage and let you know that it’s time to start wrapping up. And then we’ll launch our panel discussion at 5:55pm on the nose.
Matt Hougan, Session Leader President of ETF Analytics& Global Head of Editorial IndexUniverse
Lawain McNeil, Panelist Founder and Chief Marketing Officer Efficient Advisors
Adam Grossman, Panelist Director of Asset Allocation Research RiverFront Investment Group
Mike Vogelzang, Panelist President & Chief Investment Officer Boston Advisors
ETF Model Portfolio Provider
Symposium
Presenter
Presentation Notes
Thanks, everyone. And now, to finish things up, we’re going to invite three of the providers here in the room up for an in-depth panel discussion. If you didn’t get the chance to sit with these guys yet, they are some of the best. Joining me on-stage are…. Lawain “Mac” McNeil is the founder and chief marketing office for Efficient Advisors, and SEC-registered RIA and technology firm located in Philadelphia, Pennsylvania. He is also the founder and President of the Advisor Lab, a technology and training firm that designs, develops and delivers tools to help advisors communicate more effectively with their clients and prospects Adam Grossman is the Director of Asset Allocation Research of Riverfront Investment Group, bringing almost a decade’s worth of industry experience in quantitative risk management and portfolio analytics and works with the chief investment officer and chief quantitative strategists in developing capital market assumptions, advancing RiverFront’s proprietary optimization tools and setting asset allocation strategy. Mike Vogelzang is the President, Chief Investment Officer, and Chairman of Boston Advisors, LLC. He oversees the firm's investment activities and business practices and is responsible for directing the equity investment management process for both individual and institutional clients. He led the firm's management buyout in 2006 and has managed Boston Advisors since 1997. And to kick things offer, we’re going to spend a few minutes of rapid-fire conversation with each firm talking about their specific approach to the market. Pete, let’s start with you.
Adam Grossman Director of Asset Allocation Research
Investment Process Dynamic strategic asset allocation, tactical adjustment, portfolio
construction and risk management Dynamic Strategic Asset
Allocation
Tactical Adjustments
Portfolio Construction
Risk Management
Comprehensive asset allocation portfolios constructed based on investor risk tolerance and time frames. Price Matters® frame work grounded in value.
Dynamic strategic allocations adjusted based on momentum discipline.
Individual stocks, bonds and ETFs combined to create integrated asset allocation portfolios. Specialized investment teams for each asset class with unique discipline and process.
Risk management team conducts ongoing assessment of market and portfolio holding risks.
Riverfront Moderate Growth & Income INVESTMENT OBJECTIVE: Seeks to provide attractive current income and the potential for income
to grow through balanced investments in dividend-paying stocks and fixed income instruments with opportunities in higher risk assets somewhat muted by risk-reducing, lower volatility investments.
Holdings as of February 6, 2013; Diversification does not ensure a profit or protect against a loss. Please see the end of this presentation for additional important disclosure information.
How To Access Riverfront
We are available at numerous financial services firms and through clearing platforms such as Schwab, Pershing, TD Ameritrade, Placemark, Folio DX and Envestnet.
www.riverfrontig.com Sign up to receive weekly commentaries & create a log in to our Advisor Website
Please visit our website for the complete publications of the Strategic View and our 2013 Outlook.
Lawain MacNeil Founder & Chief Marketing Officer
Efficient Advisors Investment Methodology
Efficient Advisors Capital Markets Investing
Modern Portfolio Theory
Efficient Market Hypothesis
Three Factor Model
Efficient Advisors Growth Portfolio
Efficient Advisors Growth Portfolio Seeks to provide capital appreciation. Equities are substantially emphasized. A small allocation to fixed income asset classes is made to reduce volatility; however, investors should realize that the substantial emphasis on equities will produce a higher level of volatility than a more balanced portfolio.
Time Horizon: greater than 10 years
Expected Return: returns to exceed inflation
Volatility: above average volatility
U.S.STOCKINT'LSTOCKBONDS
U.S. STOCK 37.50%U.S. Large Cap 5.63%U.S. Large Value 11.25%U.S. Small Cap 5.63%U.S. Small Value 9.38%U.S. Microcap 5.63%
INT'L STOCK 37.50%Int'l Large Cap 3.75%Int'l Large Value 10.13%Int'l Small Cap 3.38%Int'l Small value 13.50%Emerging Markets 3.00%Emerging Markets SM 3.75%
BONDS 25.00%One Year Fixed 6.25%Two Year Global 6.25%Intermediate Gov't 12.50%
Mike Vogelzang President & Chief Investment Officer
Broad Allocation Strategy: Core
2) Broad Diversification helps investors: • Takes advantage of changing market
conditions • Captures multiple sources of returns • Protects capital during downturns • Liquidity, transparency and
diversification
1) BAS uses : • Global assets • Tactical and strategic asset allocation • Active risk management – proprietary
allocation models to increase/decrease risk
Risk Assets - 33%
US Equity
International Dev'd Equity
Emerging Equity
Real Estate
Metals
Global Credit
Municipal Bonds
Cash/Other
Uncorrleated Assets - 33%
Risk Off Assets - 33%
Agriculture
Energy
Currency
Global Sovereign
During periods of high environmental risk, increase
stable assets
During periods of low environmental risk, increase
risk assets
Broad Allocation Strategy: Growth Portfolio CASH 0.50%
EQUITY 0.50%Developed Int'l
VEA MSCI EAFE 10.70%EWP MSCI Spain Index Fund 2.10%IDLV S&P International Developed Low Vol 4.00%
Developed U.S.RSP S&P Equal Weight 6.40%SPY S&P 500 Fund 12.60%
EmergingEWZ MSCI Brazil Index Fund 3.50%
EPOL MSCI Poland Investable Market 1.60%EELV S&P Emerging Markets Low Vol 4.00%
ILF S&P Latin America 40 Index Fund 3.10%VWO Vanguard Emerging Markets Fund 10.20%
FIXED INCOME 5.40%Sovereign
IEF Barclays 7-10 Year Treasury Bond Fund 4.40%Broad Market
AGG iShares TR Lehman AGG Bond 1%COMMODITY 23.40%
EnergyDBE DB Energy Fund 6.00%
AgricultureJJA DJ-UBS Agriculture Subindex Total Return ETN 2.00%RJA Rogers Int'l Agriculture Index ETN 4.50%
MetalsIAU Gold Trust 7.60%
PPLT Physical Platinum Shares 3.20%CURRENCY 2.80%
DBV Db G10 Currency Harvest Fund 2.80%Real Estate 5.90%
REM FTSE NAREIT Mortgage Plus Capped Index 4.00%VNQI Vanguard Global Ex-U.S. Real Estate Fund 1.90%
OTHER 3.90%XVZ S&P 500 Dynamix VIX ETN 3.90%
How to Access Broad Allocation Strategies: Platforms:
Fidelity Envestnet Placemark Commonwealth Securities LPL TD Ameritrade Schwab E*Trade
Available as SMA, UMA and Mutual Fund
Contact Information Efficient Advisors www.EfficientAdvisors.com 888-320-6250 [email protected]
Boston Advisors www.BostonAdvisors.com 617-348-3100 [email protected]
RiverFront www.RiverFrontIG.com 866-583-0744 [email protected]
iShares Connect www.ishares.com 1-800-474-2737
ETF Model Portfolio Provider
Symposium
Matt Hougan, Session Leader President of ETF Analytics Global Head of Editorial IndexUniverse
Katharine Earhart, Session Leader Director, Head of iShares Connect BlackRock
Participating Firms Astor Asset Management Boston Advisors Clark Capital Management Group CLS Capital Efficient Advisors Integrated Capital Management iSectors JA Forlines Global RiverFront Investment Group Wela Strategies
Presenter
Presentation Notes
My name is Matt Hougan. As most of you know by now, I am the Global Head of Editorial and President of ETF Analytics for IndexUniverse, the host and organizer of this conference. I’m pleased to be joined onstage here by Katharine Earhart. Katharine is a director and the head of the iShares Connect program within BlackRock's Global Client group. iShares Connect is really, to my mind, the reason we’re all here today. It – more than anyone else --- really helped jumpstart the whole ETF Investment Strategist boom, starting in 2008, when it launched the iShares Connect Guide, highlighting firms using ETFs to build portfolio exposures and working to connect them to advisor clients. Katharine knows more about this space than almost anyone in the world, and it’s been a real pleasure partnering with her and her team at iShares Connect to organize today’s symposium.
