September 16, 2011

Morningstar Adds ETF Offerings to Its Managed Portfolios Platform

Strategies use ETFs in areas that are “less ripe” for active managers

Morningstar announced new offerings on Thursday to its Morningstar Managed Portfolios platform, a fee-based investment management program offered through financial advisors. The strategies, which include active/passive, momentum ETFs, and global tactical ETF portfolios, utilize resources developed by Morningstar-owned Ibbotson Associates.

morningstar logo"We're thrilled to make the Ibbotson portfolios available to the more than 30,000 independent financial advisors who have access to the Morningstar Managed Portfolios platform," Jeffrey Ptak, president and chief investment officer of MIS, said in a statement. "Advisors have increasingly sought low-cost, active investing solutions that employ exchange-traded funds. We think they'll find plenty to like in the Ibbotson portfolios, which further broaden our lineup while putting Ibbotson's institutional capabilities within their clients' reach."  

According to the company, the five Ibbotson Active/Passive Portfolios use ETFs or indexed mutual funds in areas that are less ripe for active managers, and actively managed funds in realms where a portfolio manager is more likely to add value after taking risk into account.

Momentum investing takes advantage of trends in investment returns. According to Morningstar, the five Momentum ETF Portfolios will exploit the patterns by systematically under- or over-weighting asset classes based on momentum signals developed by Ibbotson. The portfolios confer the benefits of low-cost, broadly diversified investing, but also rapidly adjust to evolving market conditions.

The company claims that while momentum explains some of an asset class' return pattern over shorter time periods, over longer time spans returns tend to revert to their historical averages, or means. This implies that investors could benefit from buying what's out of favor and selling what's in vogue over the long term, while following trends in the short term.

The Ibbotson Global Tactical ETF Portfolio combines momentum and "mean-reversion" signals to allocate among asset classes. The portfolio is not tied to a target allocation, but invests in areas of the market identified by Ibbotson's methodology. The Global Tactical ETF Portfolio is geared toward investors seeking a "dynamic, opportunistic approach."

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