News Mentions & Press Releases

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.

Read the Full Article

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:

Read the Full Article

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.

Read the Full Article

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.

Read the Full Article

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.

Read the Full Article

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.”

Read the Full Article

Reviewing 2017 Markets: Cryptoassets, Market Highs & Value Vs Growth

January 29, 2018
Mark Matthews, CLS Investment Research Analyst — ETF Trends

While short on market volatility, 2017 suffered no shortage of excitement. Major U.S. indices went on a tear with both the S&P 500 and Dow Jones Industrial Average (DJIA) setting all-time record highs. However, the biggest theme of 2017 was the breakout year in cryptoassets.

Cryptoassets took the market by storm. At the start of the year, the total value of cryptocurrencies stood at just $15 billion; but by the end of the year, that number had reached $500 billion. While Bitcoin dominated the headlines, the parabolic appreciation of cryptos in 2017 was due in large part to the emergence of competing coins. Just one year ago, Bitcoin made up 90% of the cryptocurrency market and was the lone coin with a total value of more than $1 billion. Now, there are 36 coins with a total value greater than $1 billion and Bitcoin accounts for less than 40% of the market.

One may ask how an asset that returns more than a 1,000% in a year loses a vast majority of its market share. As the graph below shows, Bitcoin’s astonishing performance doesn’t even rank in the asset class’s top 10. Such a phenomenon could only happen in the volatile world of cryptocurrencies.

Read the Full Article

Are There Enough ETFs?

January 24, 2018

There are more than 2,000 exchange-traded funds right now. Is that enough?

“It’s easy to put the devil’s advocate hat on and say, ‘Enough is enough. Do we really need ETF 2,100, ETF 2,500?,” Dave Nadig, CEO of, said. “Is there anything left to invest in that any rational investor would care about?’”

Nadig posed this question to a panel of experts brought together by State Street Global Advisors ahead of the 25th anniversary of the world’s first ETF — the SPDR S&P 500 ETF (SPY).

According to Jim Ross, chairman of the global SPDR business, there’s “always room” for more ETFs. However, it’s not as easy to launch new ETFs as it used to be.

Read the Full Article

What Multi-Factor ETFs & Active Managers Don’t Have in Common

January 24, 2018
Joe Smith, CFA, CLS Senior Market Strategist — ETF Trends

Investors continue to focus on factor investing as more ETF issuers launch single and multi-factor ETFs that target risk premiums through rules-based indexing. Multi-factor ETFs are particularly popular as advisors evaluate the merits of using them in place of traditional active management.

Despite the promise of combining multiple factors into a single portfolio exposure, many of these indices (and their ETF counterparts) are constructed differently and deliver their promises in varied ways. This can lead to questions during the due diligence process, including:

• How much exposure results from each factor being targeted in the portfolio?

• How consistent is the construction of these portfolios with the typical behavior of an active manager?

To answer these questions, we’ll review the current index construction methods for multi-factor ETFs to identify similarities and differences. We will also derive an alternative construction approach based on Bayesian statistics to capture how active managers incorporate factors into their decision-making. Finally, we will compare hypothetical portfolios based on each construction method to compare and contrast their risk and return properties.

Read the Full Article

Ideas To Enhance Potential Returns In Global Bull Market Rally

January 22, 2018
Nancy Gondo — Investor's Business Daily

“Historically, that’s not a good starting point for future long-term market returns. Granted that was exactly the same situation as a year ago, but nonetheless, that doesn’t change the fact that historically higher valuations eventually translate into lower long-term returns,” Vanneman said.

“Corporate earnings growth has been great, about 20% year-over-year, and tax reform might help short-term, but earnings growth is already high and appears to be toppy,” he said. “Typically, the best stock market returns are when earnings growth is improving from low levels. That’s not where we are currently at in the cycle.”

CLS, which manages more than $8.5 billion, uses exchange traded funds to build portfolios for its clients. Prior to joining CLS in 2012, Vanneman was chief investment officer at Kobren Insight Management and a senior analyst at Fidelity Management & Research in Boston.

Read the Full Article