Tuesday, 24 September 2013 19:53 admin
In a recent interview with FundFire (a subsidiary of Financial Times), Mitch Reiner gave his perspective on firms now focused on ETF based SMAs (separately managed accounts) whose assets are with ETF strategists.
Reiner says, “We believe our strategies would be well-received if we can get them in front of the right people. We’re not a tactical manager – we’re more strategic and simple. We re-allocate twice a year, as opposed to the black box tactical strategies. We believe there is an audience for that, and that Randy has the expertise to engage in the right conversations with the right people.”
This interview comes as the result of industry veteran, ETF Solution Group, launching a third-party marketing firm targeting smaller managers of exchange-traded fund-based SMAs, whose assets are still concentrated in a handful of these “ETF strategists” despite the sector’s 60% growth last year.
ETF Solution Group is starting out with three asset managers as its clients, says Randy Bullard, a former executive at Placemark Investments, who left that firm last year to focus on several business lines serving the ETF strategist market. He aims to help Wela Strategies, Hahn Investment Stewards, and Globalt Investments gain wider distribution for a product set that has swelled to $73 billion in assets, according to Morningstar, mostly from independent advisor firms.
“These are three of the top-performing managers that are not in the top 10 in size,” Bullard says. “Of the 140 or 150 firms that Morningstar tracks, only a dozen or so have $1 billion or more. The flows are heavily skewed to two or three high-performing products, but that’s not always the best product for each client.”
Bullard says the market is “over-concentrated right now,” especially at a time when the supply of ETFs these asset managers can use is mushrooming. “It’s fueling the development of really great products,” he says.
ETF Solution Group is trying to get an edge for its clients in a segment where many managers – even among the big players – have not built out extensive sales infrastructure. The firm will aim to market their products across all of the major advisory business channels.
Bullard says the imperative for ETF strategist firms is to catch up with the top firms in the segment, which have inhaled most of the flows because of strategic distribution relationships. His firm aims to grow its manager clients into “multi-billion” dollar status by building on “preferential relationships” with both retail sponsors and institutions in the U.S. and Canada.
The three managers ETF Solution Group is working with each have slightly different investment approaches, Bullard says. Hahn, which has three offices in Canada, has a global, tactical strategy focused on managing downside risk, while Atlanta-based Globalt has a strategy with similar aims but centered on U.S. investments. Wela, also based in Atlanta, runs more of a strategic income-based strategy.
Wela is aiming to build on initial relationships this year, targeting advisory shops “that share our core values,” says Mitch Reiner, managing partner at the firm. It expects the best fit will be smaller, regional sponsors at first, and would only extend to the wirehouses after the firm grows its asset base, he says.
The manager’s model branches off of the investment research and asset allocation work of Capital Investment Advisors, an independent advisor firm with $1.2 billion in assets where Reiner is also a partner. Wela creates mostly ETF-based versions of Capital Investment’s strategies, and currently distributes them on platforms from LPL Financial, Envestnet, Placemark, and Prospera Financial Services. One of Wela’s flagship products blends ETFs for various income-oriented asset classes – master limited partnerships, real estate investment trusts, preferred securities, and fixed income – into a single portfolio.
Original article from www.fundfire.com