Grafico Azioni Cambria Global Asset All... (AMEX:GAA)
6 Mesi : Da Giu 2019 a Dic 2019
By Ari I. Weinberg
There is a peculiar mystery going on inside the world of exchange-traded funds.
ETFs are hugely popular with investors, and part of their appeal is how simple they are to buy and build a portfolio around. Yet there are few options out there for asset-allocation ETFs -- ones that contain a mix of investments, like the familiar target-date or target-risk mutual funds in retirement accounts. And the asset-allocation options that are in the market now haven't drawn a lot of interest.
Why have asset-allocation funds been pretty much immune to the ETF fervor? The answer can be found in the nature of retirement accounts, where most of these asset-allocation funds are found.
The retirement advantage
Collectively, traditional asset-allocation mutual funds -- which include target retirement-date funds, target-risk funds and balanced funds -- hold $1.3 trillion, according to Morningstar Direct. And those funds are a widespread option inside of retirement plans, including IRAs. They got a huge boost in 2006 with the Pension Protection Act, which mandated that 401(k) plans put participants in a qualified default investment alternative if they don't make an active choice. Often, that meant an asset-allocation vehicle.
The upshot is that when ETF companies tried to break into the asset-allocation world a few years ago, they found that the largest market was already dominated by mutual funds.
What's more, the usual tax benefits of ETFs aren't as significant inside of retirement plans, because those accounts are tax-advantaged to begin with.
So, asset-allocation ETFs haven't found much of an audience. In fact, two of the earliest entrants into the ETF asset-allocation field, DWS and BlackRock, which offered suites of target-date products, closed those funds four and five years ago, respectively.
The persistent problem
According to research firm CFRA, there are still only about 40 asset-allocation funds available as ETFs, primarily constructed as "ETFs of ETFs" -- in other words, an ETF holding other ETFs. Asset-allocation ETFs manage just $7.5 billion in assets, with three iShares Core ETFs from BlackRock (Growth, Moderate, and Aggressive) each holding about $1 billion, and another (Conservative) at $535 million. Net expense ratios run from 0.2% to over 2%. ETFs have total assets of $4 trillion.
"ETF issuers have rushed into a lot of areas, such as factor investing and thematics," says Todd Rosenbluth, head of ETF and mutual-fund research for CFRA in New York, "but allocation funds remain very small relative to the opportunity."
In addition to the retirement-plan problem, some experts and ETF executives argue that there is another reason for the lack of asset-allocation ETFs.
Fund managers have been focused in recent years on selling ETF to, and through, financial advisers, says Rick Ferri of Ferri Investment Solutions. That means, he says, that many ETF companies don't want to introduce all-in-one products that compete with those advisers, who plan out portfolios for clients.
Similarly, he says, it may not be in the interest of financial advisers to push ETFs that do the asset allocation for investors. Mr. Ferri, who provides portfolio advice but doesn't manage client money, says advisers and asset managers can make investment solutions more complicated than they need to be to justify their fee. This includes frequent rebalancing. Balanced ETFs would eliminate this, which is why "those advisers are not fans."
(Of course, the same is true of traditional asset-allocation mutual funds -- but they are buoyed by their massive advantage in retirement accounts and don't need strong support from financial advisers to thrive.)
In December 2014, Meb Faber, chief executive officer and chief investment officer of Cambria Investment Management, was ready to "disrupt the traditional high-fee asset-allocation fund universe" when his firm launched Cambria Global Asset Allocation ETF (GAA), the first of Cambria's three allocation ETFs. But breaking through has been a challenge.
"No broker or adviser wants to put a client in just one fund," says Mr. Faber, who has put most of his publicly traded investments into his Cambria Trinity ETF (TRTY). Since its launch in September 2018, it has accumulated $35 million in assets.
A guiding hand
Kostya Etus, portfolio manager, CLS Investments, a $9 billion investment manager in Omaha, disagrees that financial advisers shun broad ETFs out of self-interest. Rather, he says, financial advisers are able to assess investments for specific clients with specific needs, as opposed to the broadly generalized approach of an asset-allocation product. Advisers can also can choose the best ETFs, no matter who issues them -- which reduces bias. He attributes the advantage of conventional asset-allocation mutual funds largely to their entrenched position in retirement plans.
Despite the obstacles, some of the largest ETF issuers are going ahead with the all-in-one ideas. Along with BlackRock, State Street Corp.'s State Street Global Advisors and Invesco offer suites of allocation ETFs. Vanguard Group, which offers balanced mutual funds for as little at 0.07%, doesn't currently have an all-in-one ETF in the U.S., but has a handful of allocation ETFs in Canada. The products currently have assets of $2.1 billion Canadian (US$1.5 billion).
"The traditional buyer of balanced funds hasn't shown up yet in the U.S. ETF market," says Rich Powers, head of ETF product management for Vanguard, "but we're still in the early innings."
Mr. Weinberg is a writer in Connecticut. He can be reached at email@example.com.
(END) Dow Jones Newswires
September 08, 2019 22:25 ET (02:25 GMT)
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