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By Andrew Gogerty | 10-04-2012 12:00 PM

Finding Flexibility With Multi-Asset-Income ETFs

Sage's Rob Williams says such income strategies offer the benefits of investing outside the bond market altogether and into REITs, MLPs, and dividend-paying stocks.

Andrew Gogerty: Good morning. This is Andrew Gogerty from Morningstar's ETF Invest Conference, and we're talking today about the trend in multi-asset-income strategies coming to market. Joining me this morning is Rob Williams, principal at the Sage Advisory Group.

Rob, thank you for joining me today.

Rob Williams: Thanks for having me today, Andy.

Gogerty: So, multi-asset-income strategies are starting to come to market; we're seeing them in a variety of wrappers. Sage has a historic institutional fixed-income background, yet for this strategy, you chose to use ETFs as the vehicle to express that. What kind of factored into that decision?

Williams: Yeah, correct. We do both. We do ETF strategies and individual bond strategies. Where ETFs make a lot of sense, we found, is outside the core bond market, more illiquid, difficult-to-reach sectors where you want to be a little more tactical, like high yield in emerging markets. Take that a step further into multiasset income, not only are you going outside the core bond market, but you're going outside the bond market period, into REITs, perhaps MLPs, dividend equity.

So, you want to be more flexible and tactical, and we find with the ETF product, you can maintain the integrity over an SMA account, make it scalable to lower dollar amounts. And as a manager, we love it because we have global access to all bond markets, noncore bond markets, as well as equity markets that are hard to reach and we're able to be tactical and be in and out of those segments whenever we deem fit, according to our outlook.

Gogerty: It seems like part of that scalability is kind of the cost-effectiveness of using the ETF to get an exposure as opposed to try and replicate all those individual securities to get the same asset class.

Williams: Precisely. Yeah. We find even though we run similar strategies in our regular business using individual securities, we even find for a high-yield-trade examples, if we see relative value to want to get in and out of high-yield, it's way more efficient for us, and liquid, to do one trade in one ETF and get that position on or off rather than unwinding our whole 50 or 100 positions or tweaking that in the regular portfolio. So, it brings a lot of efficiencies to bear.

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