ETF strategists eye tactical asset allocation

A preference for tactical asset allocation strategies is the chief factor fueling advisors’ interest in exchange-traded funds, according to a new report.

So reveals Cerulli Associates in an August survey of U.S. monthly product trends. The survey examines changes impacting mutual funds, exchange-traded funds (ETFs), money market funds and new products.

More than eight in ten (82 percent) of the respondents rate “advisor appetite for tactical allocation” as a “large driver” of growth in the ETF space. In contrast, fewer than 60 percent of respondents rate the six other factors examined as a major driver.

Among them:

• Advisor push to outsource portfolio allocation (58 percent);
• Advisors appetite for ETF exposure but unwillingness to trade ETFs themselves (46 percent);
• Low fees relative to other providers (45 percent);
• Superior performance by ETF strategists (37 percent);
• Inclusion in home-office controlled portfolios at broker-dealers (24 percent); and
• Educational efforts by ETF sponsors (23 percent).

By channel, the report adds, fund providers distributed more than a quarter (28 percent) of ETF strategy assets in 2012 through the independent broker-dealer channel. ETF strategy assets also found traction among:

• Wirehouses (21 percent);
• Regional broker-dealers (16 percent);
• Third-party vendors (15 percent);
• Registered investment advisors (14 percent);
• Direct channels (2 percent);
• Bank broker-dealers (2 percent); and
• Bank trust/private client groups (2 percent)

The survey observes also that more than two-thirds of ETF strategists (68 percent) expect their growth to outpace that of the wider market.