ETF Managed Portfolio Attributes Part I: Universe and Asset Breadth
Periodic (typically quarterly) portfolio disclosures may be of little use to decision-makers, if the portfolio has since been significantly changed. The evolution of tactically managing a portfolio of ETFs has created a need for a standard framework to aid in classifying these strategies.
See the Attribute and Classification Summary matrix for an overview of the four main attributes and options of each.
In this Solution, we focus on the Universe and Asset Breadth attributes.
Strategies assigned this attribute primarily use ETFs providing exposure to non-U.S. equity and fixed-income securities.
In benchmark or starting portfolios, the Global attribute was assigned to strategies with at least an 80/20 split among U.S. and international exposure. We also took into account, where necessary, the regional exposure of the dominant asset driver designated in the Asset Breadth attribute (see next slide).
Asset Breadth: Alternative
Alternative strategies seek returns uncorrelated to equity and fixed-income markets by attempting to remove one or more asset betas or return drivers. They use long/short strategies or other alternative ETFs, such as currencies or commodities, as the primary return driver in the portfolio.
Asset Breadth: Equity
The primary asset driver of these strategies is long or beta-type exposure to equity securities. The use of leverage by the underlying ETF is ignored. These strategies typically have at least a 70% allocation to equities.
In the next Solution Center presentation, we discuss the Portfolio Implementation and Primary ETF Exposure Type attributes.