News Mentions & Press Releases

Investors Still in Love With Growth Stocks Risk Losing Out on Value

March 15, 2018
Reuters — The New York Times

NEW YORK — A long rally in technology stocks has left investors thirsting for more, but that could be a mistake as the strengthening U.S. economy points to better value in other stocks.

Heavyweights like Apple, Alphabet and Facebook have especially helped growth indexes in the past year rise more than value indexes, which right now are heavily weighted in financials.

Tech so far in 2018 is the best-performing sector too, leading the recovery from the market’s steep selloff in early February, with the Nasdaq hitting record highs again in recent sessions.

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Fund Managers to Watch

March 15, 2018
Money Management Executive — Money Management Executive

Among this year’s crop of notable fund managers, a couple of key themes emerge: the importance of acclimating to rapidly shifting economic conditions and the challenges faced by active managers at a time when low-cost passive products are favored by many investors.

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There’s an ETF for That!

March 14, 2018
Kostya Etus, CFA, CLS Portfolio Manager — ETF Trends

We all know and love ETFs. They mark an evolution in financial markets and a revolution in investment management. There are countless commonly known potential benefits, such as tax advantages, transparency, and low cost. But ETFs have important, yet less known advantages. For example, ETFs provide a tool for most jobs. The current lineup of 2,182 ETFs offers a range of strategies to reach a variety of investing goals for a variety of investors. Let’s explore a few ways ETFs could be used by investors.

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ETF Industry Ripe For Consolidation

March 1, 2018
Joe Smith, CFA, Senior Market Strategist —

Have you ever wondered what goes into determining whether an idea is good enough to become an ETF? As the ETF market continues to expand with new product launches almost every few days, one could argue it doesn’t take much to turn someone’s ideation into another exposure trading as an ETF.

Speaking from experience, what used to matter for launching ETFs doesn’t seem to matter anymore. At one time, first-mover advantage was a big deal. It’s not so much anymore.

Providing access to an untapped segment of the market was considered innovative. I would argue just about every asset class is now covered. Fees weren’t a big part of the investment consideration. Now they are the lead reason some investors choose to buy an ETF.

The ETF industry, in many ways, is following a similar path to that of the technology industry. The market has gone from pure innovation and differentiation to the “copycat” app business. Most ETFs on the market are all playing in the same place with just minor variations of each other.

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Strategic Versus Tactical Asset Allocation

February 15, 2018
Rusty Vanneman, CFA, CMT — ETF Trends

Investors often ask, and for good reason, which asset allocation approach is best: strategic or tactical. The answer, like much in the markets, is it depends. Investors should consider which matches up better with his or her philosophy, temperament, and objectives. These qualitative considerations are the keys to determining which approach is best suited to keeping investors participating in the market’s long-term growth.

Before I dive deeper, let’s define the terms. Different definitions are used by different market players, so it’s important to make sure everybody is on the same page before a proper discussion can begin.

At CLS Investments, we believe a strategic allocation approach is one that manages to a target allocation, whether one is targeting risk or an asset allocation. We target risk based on our Risk Budgeting Methodology. With a strategic approach, an investor should have confidence the portfolio will behave as expected and adhere fairly closely to the target. Strategic does not mean buy-and-hold or passive. It most often means active — in the sense that the portfolio is being actively managed to account for changes in expected risks and returns within the markets.

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An Open Letter to Our Copycat Trader

February 7, 2018
Grant Engelbart, CFA, CAIA, CLS Portfolio Manager —

In October, CLS Investments, an ETF strategist, noticed an anonymous trader following their models and the trades they made in them. Here’s the firm’s response.

Dear Copycat Trader,

Most advisors understand best trading practices and get help from an ETF strategist to ensure they’re doing right by their clients. However, we can’t quite figure you out. We know you have been following our ETF models and the trades we make in them. We’re assuming it’s because you didn’t want to pay an ETF strategist fee. We, in fact, offer models with multiple strategists and no strategist fee. In addition, there are a number of reasons to allow professional traders handle ETF orders in particular.

We’d like to take this opportunity to fill you in on some ETF trading best practices. ETFs are innovative investment vehicles that provide investors with a number of potential benefits. One is the ability to trade and observe the price of an ETF throughout the day. However, this benefit can turn into a drawback if certain best practices are not followed, such as:

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Getting Active in 2018

February 5, 2018
Grant Engelbart, CFA, CAIA CLS Portfolio Manager — ETF Trends

Some of the most common New Year’s resolutions are to work out more, lose a few pounds, or just be more active in general. Despite the overwhelming trend in flows into low-cost, passive, index investment products, investors would be wise to adopt the same resolutions with their investments.

Actively managed mutual funds have been around for nearly a century and still command more than $11 trillion in assets (in the U.S.) However, over the past three years, more than $400 billion has flowed out of active mutual funds, mainly into passive ETFs. There have been many reasons cited for this migration, with the most common being higher costs and underperformance of active managers. But do active managers add value? The answer might surprise you.

Since 2001, using Morningstar categories as a proxy, active managers on average have delivered negative excess returns relative to applicable benchmarks. Some categories did outperform (high-and low-category returns shown in the boxes below), but on average, active managers failed to add value above and beyond their expenses.

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2 Tips for Investing in Emerging Markets in 2018

January 30, 2018
Rebecca Lake — U.S. News & World Report

U.S. stocks may be in the spotlight these days, but for emerging markets, 2017 was a banner year. The MSCI Emerging Markets index, which tracks 24 countries representing 10 percent of world market capitalization, generated cumulative gross returns of 37.75 percent in 2017. By comparison, the Standard & Poor’s 500 index returned 19.42 percent, according to Morningstar.

The surge in emerging market stocks reflects their strengthening fundamentals and a growing global economy. It’s a significant turnaround from the previous six years, when emerging markets suffered a slump characterized by spiraling profitability and poor earnings growth.

Last year’s performance was welcomed by emerging market investors, and the outlook for 2018 remains mostly positive. According to the latest Emerging Markets Investor Sentiment Survey by Columbia Threadneedle Investments, 57 percent of investment managers and advisors expressed optimism about emerging markets’ prospects. Forty-three percent said they planned to increase their emerging markets allocation over the next 12 months.

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DIY Index Tracker Could Slash Managed Account Costs, Elbow Out Managers

January 30, 2018
Thomas Coyle — Financial Advisor IQ

Big money managers might be on the run when Orion Advisor Services debuts in March a tax-smart direct-indexing widget for financial advisors. The new tool lets advisors build their own trackers and has the potential, Orion claims, to boost customization for separately managed accounts while lowering costs.

The Omaha, Neb.-based portfolio-service provider to 1,400 RIAs and their affiliated representatives says in a press release its Advisor Strategy and Tax Return Optimization tool — “Astro” for short — lets FAs tailor tax-efficient non-qualified SMA portfolios to individual clients “faster and with less expense than ever.”

Orion will charge a flat rate of $50 per account per year to use Astro, the company’s CEO Eric Clarke tells FA-IQ.

Using Astro, advisors can supposedly do things like replicate indexes with customized tilts, mesh legacy stock positions with model portfolios, accommodate environmental, social and governance requests, and get “notifications when an account is out of tolerance” along with “automated tax-loss harvesting,” according to Orion.

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Orion Advisor Services, LLC (“Orion”), the premier portfolio accounting service provider for advisors, today announced that its direct-indexing tool for Advisor Strategy and Tax Return Optimization (“ASTRO”) will become available to all financial advisors on the Orion platform on March 1, 2018.

With ASTRO, advisors can create customized, separately managed account (SMA) portfolios for all of their clients, faster and with less expense than ever. Advisors can build tax-efficient non-qualified accounts, replicate indexes with customized tilts, incorporate legacy stock positions into model portfolios, accommodate environmental, social, and governance (ESG) requests, and receive notifications when an account is out of tolerance, all with built in automated tax-loss harvesting.

“Until now, the high costs and massive time commitment associated with building highly customized separately managed accounts prevented financial advisors from bringing these capabilities to clients,” said Eric Clarke, CEO of Orion. “The powerful technology fueling ASTRO empowers advisors to accomplish all of the above in minutes at a fraction of the cost.”

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