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An Overview of the ETF Managed Portfolio Landscape

Insight into a universe of investment strategies that is quietly becoming a force in the ETF industry.

Andy Gogerty, 06/20/2012

In January 2012, Morningstar released the ETF Managed Portfolios Landscape Report, a comprehensive review of strategies that primarily use exchange-traded funds and that are contained in our separate account database.

ETF managed portfolio strategies have more than 50% of portfolio assets invested in exchange-traded funds and represent one of the fastest-growing areas of the managed-account space. The landscape report tracked nearly 370 strategies from 95 firms with collective assets under advisement, or AUA, of $27 billion as of September 2011--a 43% growth rate over the previous 12 months.

We estimate that the total ETF managed portfolio space is likely between $40 billion and $100 billion when considering discretionary and non-discretionary assets and model portfolios. Strate­gy launches have increased dramatically in recent years: Nearly two thirds of the strategies started in 2005 or later, and 30% of the strategies are less than three years old.

The growth can be explained rather succinctly. Whether mandated by law or con­tinued market pressures, the fiduciary standard will con­tinue to grow as the standard for managing a client's port­folio, and the shift to a fee-based compensation structure follows. This shift, for many, has led to the outsourcing of the money-management function to ETF managed portfolio firms. Advisors continue to focus on gathering and retaining client assets and managing a cli­ent's overall financial profile, while ceding more of the actual portfolio-management duties to strategist firms.

The industry response to the landscape report has been tremendous. We anticipate tracking more than 500 strategies with $42 billion in strategy assets through March 31, 2012. We'll be analyzing potential new strategies that have been added to our separate-account database for inclusion in this universe in the coming weeks.

Click here for access to the full landscape report.


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