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These Were the Fastest Growing ETF Managed Portfolios in Q4

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Assets in ETF managed portfolios grew 7% in the fourth quarter of 2017 to $123 billion, according to Morningstar’s latest report on these investment strategies. All the portfolios it tracks have more than half their assets invested in ETFs.

The 25 largest firms accounted for all the asset growth in the fourth quarter, led by Vanguard, which alone accounted for one-quarter of the additional $8.4 billion in assets.

(Related: ETF Fees Are the Top Factor in Choosing Funds: Survey)

Vanguard’s ETF managed portfolio assets grew by $1.72 billion. State Street Global Advisors and BlackRock followed, with new assets growing by $1.1 billion and $711 million, respectively, in the fourth quarter.

“The fastest growing players are the ETF sponsors themselves,” says Ben Johnson, director of global ETF research. “They are increasingly moving away from selling pie slices to selling whole pies.”

The ETF managed portfolios, used primarily for advisor clients, are a subset of Morningstar’s separately managed accounts database. Morningstar tracks 1,180 ETF managed strategists from 182 firms.

(Related: BlackRock Launches New Brand of Sector ETFs)

New investment strategies drove roughly 80% of the asset growth in the fourth quarter, and they included 18 new strategies from Invesco, the parent firm of PowerShares, and 16 model portfolios from S&P Investment Advisory Services, which debuted in the fourth quarter.

Morningstar’s analysis of these ETF Managed portfolios focuses on several attributes:

  • Their universe, or asset location: U.S., international or global, which includes U.S. and international
  • Asset breadth: the strategy’s primary asset class exposure, which can be equity, fixed income, balanced (combining equity and fixed income), alternative (strategies uncorrelated to traditional equity and fixed income markets) and all assets which traditionally hold more than 10% in the “other” category and stocks and bonds
  • Portfolio implementation: strategic for long-term asset allocation plan; tactical, having potential large changes in asset mix to capitalize on short-term developments; and hybrid, which combined both strategic and tactical
  • Primary ETF exposure type: broad-based indexes, sectors, country/region, or all- inclusive.

Its fourth-quarter report found that 12 of the 20 strategies with the largest quarter-on-quarter asset growth were plain vanilla stock/bond strategic asset allocation portfolios.

Vanguard saw the most growth in its 70/30 equity/fixed income portfolio while BlackRock’s growth was led by its 60/40 Target Allocation ETF — both considered strategic portfolios by Morningstar.

Richard Bernstein Advisors, which placed fourth in quarter-over-quarter asset growth, saw the most growth in its Global Risk-Balanced portfolio, which is tactical in nature.

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