Supergrowth for model ETFs — but advisers behind the curve

Supergrowth for model ETFs — but advisers behind the curve
Massive increase in assets since 2008; more complicated offerings cow some
MAY 29, 2012
It seems that the only thing growing faster than the exchange-traded-fund industry is the model-ETF-portfolio industry. Assets in model portfolios with at least three-quarters of their investments in ETFs have grown to $46 billion, a 650% increase from 2008. BlackRock Inc.'s iShares business, the largest provider of ETFs, projects that assets in model ETF portfolios will continue to rise as retail investors seek out alternatives to traditional long-only strategies. The models also help professionals make the best use of ETFs as portfolio construction tools. Assets could hit $120 billion by 2015, according to iShares. “Advisers have to either be the expert or find one,” said Sue Thompson, head of iShares' RIA Group. “As the ETF landscape has gotten more complicated, not all advisers feel comfortable building their own portfolios.” It really is the portfolios, not the use of ETFs, that's drawing advisers in. iShares counts more than 100 today, up from 25 in 2008, and they are overwhelmingly tactically driven by macro calls. More managers are making ETFs the preferred tools for their models because they allow quick movement in and out of the market and they have ability to buy large swaths of assets in a single purchase. “When you're building a global-asset-allocation portfolio, the best ammo is ETFs,” said John Forlines, chief investment officer at Forlines Global Investment Management.

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