Investment research firm Morningstar has published the latest instalment of its ETF Managed Portfolios Landscape Report. The report, which covers the fourth quarter of 2016 and tracks 881 strategies from 162 US-based firms, found that total assets in these strategies increased 2.2% over this period to $86.7 billion.
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ETF managed portfolios are investment strategies that typically have more than 50% of portfolio assets invested in exchange-traded funds. According to Morningstar, these portfolios represent one of the fastest growing areas of the managed-account universe.
The strong net gatherings of $1.9bn marks the fourth consecutive quarter of growth in the ETF managed portfolios space.
The report highlights that outflows from strategies managed by some of the largest operators in the space were more than offset by their peers’ gains. Most notably, assets in strategies managed by Vanguard increased nearly $943 million, while approximately $95 million of the total quarter-over-quarter growth was driven by the addition of new strategies.
WisdomTree, Northern Trust, and Cambria made their debuts in the landscape this quarter. The firms are the latest ETF providers to report their strategies to Morningstar, joining BlackRock, Charles Schwab, State Street Global Advisors, and Vanguard.
Morningstar notes that advisor demand contributed significantly to growth, as greater adoption of fee-based advisory models continues to tilt portfolios toward lower-cost, broad-based investments with a focus on asset allocation, for a larger part of client portfolios.
Vanilla 60/40 stock/bond asset-allocation portfolios made up three of the five strategies with the largest quarter-on-quarter increases in assets. Morningstar believes this trend highlights a shift in investor preferences from high-flying tactical to strategic asset allocation strategies.
Morningstar reports that last year was a difficult one for many managers of global all-asset and global balanced strategies. These two groupings account for more than half of all assets in ETF managed portfolios. In both cases, the median strategy significantly lagged its blended benchmark through the end of the third quarter. While global balanced strategies regained ground in the fourth quarter and the median strategy in the category wound up beating its bogy, the median global all-asset strategy lagged its blended benchmark for the full year.