More registered investment advisors are adopting ETFs in client portfolios, according to a new Invesco study. The RIAs surveyed said ETFs will make up 24% of portfolio allocations over the next 12 months and 33% over the next three years.
“This year’s study continues to show how RIAs are embracing the value of ETFs and the many ways they can be implemented in their clients’ portfolios,” said Bobby Brooks, national sales director for Invesco PowerShares. “But even as the equity markets have enjoyed a strong run year-to-date, RIAs are still indicating that risk management is a primary focus and they are looking to a variety of products, including alternative assets, to manage risk.”
Invesco partnered with Cogent Research to conduct its second blinded study to learn what’s top of mind for RIAs and their clients given current market conditions.
RIAs continue to blend active and passive funds in a single portfolio, the study found, determining that 40% of RIAs create client portfolios using a blend of active investment vehicles and passive ETFs. Less than a quarter of RIAs utilize an exclusively all active management portfolio (24%) or an all-ETF/passive management portfolio (19%).
The surveyed RIAs cited risk management as a predominant philosophy in managing client assets (40%). The survey showed wealth preservation as the most important issue for clients, followed by mitigating risk.
Risk management investment strategies have not changed, however. The RIAs continue to mitigate risk in client portfolios by creating a blended asset allocation of active investments and passively managed ETFs (62%) and applying a more conservative asset allocation (56%).
Alternatives, emerging market equities and large-cap funds drawing more attention. Within actively managed mutual funds, RIAs are most likely to increase capital over the next 12 months in alternatives (46%), emerging market equities (43%) and U.S. large-cap funds (40%).
The RIA Market Research Study was conducted for Invesco by Cogent Research in late August and early September 2012. The study is based on a survey of RIAs around the country with an average of $478 million in investable client assets. Cogent Research is not affiliated with nor employed by Invesco.