September 14, 2012

ETF Managed Portfolios One of ‘Fastest Growing’ Segments: Morningstar

Total assets up 30% in 2012

Assets in ETF managed portfolios are one of the fastest growing segments of the managed account market, a report released in September by Morningstar found. Assets have grown 30% in 2012 and 48% since September 2011.

Morningstar is currently tracking almost 490 strategies from 120 firms, up from 370 strategies from 95 firms reported in January. The growth in assets, Morningstar found, is the result of several factors.

First, the fiduciary standard has become the “baseline philosophy” for managing portfolios. Also, growth in the fee-based model has pushed portfolios toward less expensive, broad-based investments. Finally, ETF strategies allow investors to access institutional-type diversification and portfolio management.

In January, Morningstar established a classification system that broke portfolio attributes down into four main categories: Universe, Asset Breadth, Portfolio Implementation and Primary ETF Exposure Type.

Within the Universe category, global strategies are the most popular, compared with "international" and U.S.-based strategies, the report found, with 61% of assets. U.S. equities were the largest Asset Breadth group, with 42% of assets. As a result, assets in tactical strategies have slightly overtaken those in hybrid strategies, although the Portfolio Implementation category has remained relatively stable through 2012.

The top 20 firms in the ETF managed portfolio market represent 86% of assets, the report found, up from 81% in September 2011. The largest of those have fallen off, dropping to 64% from 70% of total assets among the top 10 firms.

Here are the top 10 firms by assets. (Assets for Morningstar include assets from subsidiaries Morningstar Associates LLC, Ibbotson Associates Inc., and Morningstar Investment Services Inc.)

  1. Windhaven Investment Management       $11.04 billion
  2. F-Squared Investments                          $7.54 billion
  3. RiverFront Investment Group                  $3.14 billion
  4. Innealta Capital                                     $2.56 billion
  5. Morningstar                                           $2.43 billion
  6. Good Harbor Financial                            $2.31 billion
  7. Cougar Global Investments                    $1.63 billion
  8. Sage Advisory Services                         $1.55 billion
  9. Forward Management                            $1.21 billion
  10. Clark Capital Management Group           $1.16 billion

The report found some trends have persisted from January to the new report in September. Distribution is a key focus. Morningstar noted an increase in adoption and research of ETF managed portfolios in the wirehouse and independent broker-dealer channels. 

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