Advisors looking at separately managed accounts may want to examine a new offering from Morningstar Investment Services–Managed Portfolios Select Stock Baskets.
Available only through advisors, the portfolios consist of “baskets” of stocks based on the Morningstar indexes but individualized for an investor’s goals and risk tolerances. “Let’s give our clients a canvas to paint a picture of what they want their clients stock exposure to look like,” says Morningstar Investment Services’ President and CIO Art Lutschaunig.
As an example of how customization would work for these accounts, say an investor and her advisor decide that large-cap core and mid-cap value stocks are the way to go. The starting point for what would end up in this client’s portfolio would be based on Morningstar’s large-cap core and mid-cap value indexes, that are made up of, for this hypothetical example, 151 stocks. Investors can restrict certain types of companies (say tobacco, for example), so those stocks would be left out of the portfolio. If the client owns stocks in other accounts, they can be considered as well; in the Select Stocks Basket the allocation to those equities and sectors would be adjusted, so as not to inadvertently overweight them; and now out of the original 151 stocks in those two indexes, 93 stocks remain. Of that universe, those with the best Morningstar rating are selected for the portfolio. No more than 8% of any one stock could go into the portfolio. Advisors can specify how closely–or not–they want the portfolio to track the index.