News Mentions & Press Releases

Thematic ETFs: The Current Stage in ETF Evolution

May 8, 2019
Kostya Etus, CFA — ETF Trends

ETFs were once the baby of the investing world, the newest financial innovation. But it seems they have achieved at least teenager status now, as there are more than 2,300 ETFs available to purchase in the U.S. What may surprise you is that there are 161 unique ETF issuers, according to Morningstar data. Bet you can’t name more than 30!
With this saturated ETF landscape, it is getting tougher to compete on price alone, and there are only so many traditional asset classes to re-create.
So, what are all these issuers doing to be different, to compete, and to survive?

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OMAHA, Neb.–(BUSINESS WIRE)–CLS Investments, LLC (“CLS”) a third-party money manager and leading strategist of exchange-traded fund (“ETF”) portfolios has announced the launch of five new direct indexed, tax-managed strategies to be made available on the TAMP platform offered by FTJ FundChoice, an open architecture TAMP based in Cincinnati. The strategies, which are a response to growing client and investor demand for tax-efficient investment options, use a quantitative rules-based approach that aims to track market-cap weighted U.S. indices with the key benefit of tax-loss harvesting to off-set capital gains.
“We’re excited to launch these new strategies for FTJ FundChoice clients looking to gain access to a level of customization and tax management that was once only available to institutional investors,” says Shana Sissel, CAIA, Portfolio Manager at CLS. “We think this is very powerful – each client, depending on when they fund the account, will have different opportunities to replicate the index and tax-loss harvest and we’re taking that into account on an individual level.”
Over the last couple of years, direct indexing has grown in popularity among financial advisors and investors, primarily because of the additional tax alpha it can provide. When advisors utilize direct-indexing models, they can capitalize on tax loss harvesting opportunities to offset clients’ capital gains elsewhere.

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U.S. Stocks Slip on Mixed Earnings

April 15, 2019
Akane Otani and Donato Paolo Mancini — The Wall Street Journal

U.S. stocks fell Monday as a fresh batch of earnings reports sent bank shares sliding.
Stock trading has been muted the past few weeks as investors have waited to get a sense of how U.S. corporations fared in the first quarter.
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Can ‘nontransparent ETFs’ save active investing?

April 15, 2019
Chris Matthews — MarketWatch

Active managers have been locked in a 30-year war of attrition against passively managed exchange-traded funds, which have transformed from niche to juggernaut, representing roughly $4 trillion in assets today.
However, a recent decision by the Securities and Exchange Commission, which paves the way for active managers to offer so-called “nontransparent” ETFs, is being vetted by a number of industry participants as potential salvation for beleaguered money managers, who have both underperformed passive ETFs that track an index, like the S&P 500 SPX, SPY, or the Dow Jones Industrial Average DJIA, DIA, and experienced eroding market share.
On Monday, the SEC issued a decision, allowing Precidian, which owns the ActiveShares ETFs, to begin working with mutual-fund providers, including Legg Mason, American Century Investments, BlackRock Inc. BLK, Capital Group, and JPMorgan Chase & Co. JPM, among others, to create actively managed ETFs.

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OMAHA, Neb.–(BUSINESS WIRE)–NorthStar Financial Services Group, LLC, the parent company of Orion Advisor ServicesFTJ FundChoice, LLCCLS Investments, LLC, and Constellation Trust Company, announced today that it will be renamed Orion Advisor Solutions and unify its subsidiaries under the Orion brand identity. The changes, which will take effect in September 2019, will enable NorthStar and its subsidiaries to better align their corporate strategies; bring clarity and cohesion to the product and service experiences offered, and help identify technological synergies as the company accelerates the growth of its open architecture advisor platforms.
“For more than 20 years, the Orion brand has been known as an industry leader for best-in-breed portfolio accounting technology and integrations, providing the flexibility, customization, and support financial professionals need to succeed,” said Eric Clarke, CEO. “Now, consolidating our tech and investment companies under the same brand challenges even our largest competitors with a more connected, more seamlessly serviced, and all-around better offering, while allowing each firm to continue to invest in building upon its core strengths.”

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Tax-efficient funds with best 10-year returns

April 10, 2019
Andrew Shilling — Financial Planning

The industry’s top-performing tax-efficient funds, while pricier than their peers, have paid off over the past decade.
Top returns among mutual funds and ETFs with 0% tax-cost ratios range from about 7% to nearly 25% over the past decade, Morningstar Direct data show. With an average 10-year return of 10.14%, the ranking is led by ETFs, a detail Grant Engelbart, director of research and senior portfolio manager at CLS Investments, says should come as no surprise.
“The ETF structure is great for minimizing capital gains, as low cost basis/high gain positions can be transferred out of the ETF without tax consequence using the creation/redemption mechanism,” Englebart says. “These funds have also grown assets fairly well over the period.”
Muni and high-yield bond funds dominate the list, data show. “The muni bonds showing up makes sense,” Engelbart says, adding, “This was a strong period for fixed-income returns, and municipal bonds have federal tax-free income produced, which leads to the low tax cost ratios.”

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Choosing U.S. Multifactor ETFs

April 9, 2019
Joe Smith, CFA — ETF.com

U.S. large-cap multifactor ETFs represent a new way for advisors and their investors to gain access to a unique approach to active management.
These ETFs aim to outperform the market by ensuring the portfolio has a balanced amount of exposure from style factors, including value, momentum, quality, size and low volatility. These factors have been known to explain risk and returns in portfolios.
U.S. large-cap multifactor ETFs took in roughly $3.75 billion in new assets in the last 12 months through the end of February 2019, with total assets now topping $29 billion as of March 22, 2019, according to Morningstar.

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8 Great Ways to Buy International REITs

March 26, 2019
Rebecca Lake — U.S. News & World Report

WisdomTree Global Ex-U.S. Real Estate ETF (DRW)

DRW tracks investment results for dividend-paying real estate companies in developing and emerging equity markets. DRW’s weighting strategy makes it an attractive choice for foreign real estate investment. “Weighting by yield makes a lot of sense in real estate investments,” says Kostya Etus, senior portfolio manager at CLS Investments in Omaha. “WisdomTree does just that with DRW, weighting in a way to maximize yield, which also tends to allocate more toward some of the more undervalued real estate companies.” Etus says DRW is unique in offering a dividend-weighted approach in international real estate, while offering a reasonable exposure to emerging markets and a low correlation to equities.

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Wall Street falls on global growth worries

March 25, 2019
Shreyashi Sanyal, Amy Caren Daniel — Reuters

U.S. stocks fell on Monday, extending the previous session’s steep sell-off, hit by worries of a slowdown in global economic growth.
However, Wall Street’s main indexes were still above their session lows in choppy trading. The benchmark S&P 500 is now about 5 percent away from its record closing high hit on September.
Weak factory data from the United States, Europe and Japan on Friday led to the inversion of U.S. Treasury yield curve for the first time since 2007, fueling fears of a global economic downturn.
The benchmark U.S. 10-year treasury yields held near more than one-year lows on Monday, while the yield curve between three-month bills and 10-year notes was modestly inverted.
The Federal Reserve also flagged an expected slowdown in the economy last week and decided against raising interest rates this year.
“The market was over-sold on Friday because of slowing growth across the world and we are seeing some of that spill over to today,” said Marc Pfeffer, chief investment strategist at CLS Investments in New York.

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Emerging Markets Are Poised to Rally Again

March 19, 2019
Craig Mellow — Barron's

After a hot January, emerging market stocks are now again underperforming their U.S. peers.
The iShares MSCI Emerging Markets exchange-traded fund (ticker: EEM) is up 9% year-to-date, against 12% for the S&P 500.
But conditions remain ripe for a further rally in emerging markets, investors say. The macro risks that have been frightening investors—from a Chinese hard landing to an escalating Washington-Beijing trade war—seem to be lessening. The U.S. economy is slowing to a “Goldilocks” pace from the standpoint of emerging markets: vigorous enough to support global growth, but measured enough to keep the Federal Reserve dovish. And valuations remain cheap by historical standards.
“Our central position is for positive outcomes on the big issues,” says Jorge Mariscal, chief investment officer for emerging markets at UBS Global Wealth Management. “We are overweight global emerging market equities.”

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