Displaying items by tag: ETFs

According to a recent study, advisors are moving away from revenue-sharing products such as mutual funds and toward products such as ETFs and SMAs due to regulatory pressure and changing investor preferences. In fact, advisor use of mutual funds is expected to decrease by 13% by 2024, according to research by Cerulli Associates. Dennis Gallant, associate director at Boston-based analytics firm ISS told FA-IQ that affluent clients tend to expect products that can be personalized, such as separately managed accounts, and capabilities such as direct indexing could bring that personalization down market” Iraklis Kourtidis, co-founder and chief executive officer at Rowboat Advisors, a direct indexing provider told the magazine that there are three main reasons why custom portfolios are preferential for advisors. He said one is to meet clients’ environmental, social, and governance preferences, “which you can’t do within a fund because it’s one-size-fits-all.” The second reason is tax efficiency, particularly tax-loss harvesting, “which you also can’t do with a big fund where you lump all the money together.” According to Kourtidis, the third “much less talked about” reason is the concept of “completion portfolios.” He said, “If someone has a lot of tech exposure through stock with their employer, for example, you can give people a custom portfolio that offsets that.”

Finsum:According to research by Cerulli Associates, advisors will be moving away from mutual funds and towards ETFs and SMAs due to regulatory pressure and changing investor preferences such as personalization.

American Century Investments recently launched a new actively managed fixed-income ETF targeting floating-rate debt securities. The American Century Multisector Floating Income ETF (FUSI) trades on the NYSE Arca and has an expense ratio of 0.27%. FUSI seeks to complement an investor's core bond holdings with current income, broad diversification, and the potential to mitigate the impact of rising rates. The ETF invests across various floating rate security segments including collateralized loan obligations (CLOs), commercial mortgages, residential mortgages, corporate credit, and other similarly structured investments. Plus, up to 35% of the portfolio may be allocated to high-yield securities including bank loans and other lower-rated floating-rate debt. Managers Charles Tan, Jason Greenblath, and Peter Van Gelderen build the ETF’s portfolio using a sector rotation approach that combines macroeconomic inputs, technical analysis of the relative value among various sectors, and fundamental research on individual securities. As part of the launch, Sandra Testani, Vice President of ETF Product and Strategy, stated, “FUSI compliments our current ETF income.” She also noted that “We believe a diversified floating rate mandate has the potential to mitigate downside risk and increase income, and we are excited to offer this on our ETF platform.”

Finsum:American Century recently launched the actively managed American Century Multisector Floating Income ETF (FUSI), which invests across various floating rate security segments such as CLOs, commercial mortgages, residential mortgages, and corporate credit.

Goldman Sachs Asset Management recently launched the Goldman Sachs Community Municipal Bond ETF (GMUN). The ETF, which trades on the NYSE Arca, seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Bloomberg Goldman Sachs Community Municipal Index, a rules-based index designed to track the municipal securities market with remaining maturities between one and 15 years. The ETF also has screens that consider certain social or environmental factors. By focusing on 1-to-15-year maturities within the investment grade municipal bond universe, the portfolio will seek to deliver diversified market exposure with lower duration and higher credit quality than the broader municipal market. The ETF is managed by Goldman’s Municipal Fixed Income team which brings decades of experience with an active and disciplined approach to investing in a market that is vast and fragmented. The fund has an expense ratio of 0.25%. According to Goldman, targeted allocation into municipalities and projects with positive impact will provide the opportunity to invest in education, healthcare, clean energy, and more community-related initiatives.

Finsum:Goldman recently launched its first muni ETF, the Goldman Sachs Community Municipal Bond ETF (GMUN), which provides exposure to tax-exempt municipal securities with remaining maturities between one and 15 years.

Vanguard recently expanded its tax-exempt bond ETF lineup with the launch of the Vanguard Short-Term Tax-Exempt Bond ETF (VTES), which is built to help investors earn consistent, tax-exempt income. The fund’s objective is to track the performance of the S&P 0-7 Year National AMT-Free Municipal Bond Index using a sampling technique to closely match key benchmark characteristics. The index measures the investment-grade segment of the U.S. municipal bond market with maturities between one month and 7 years. This is Vanguard’s first US-listed ETF launch in nearly two years. The ETF, which is managed by Vanguard Fixed Income Group, has been listed on NYSE Arca with an expense ratio of 0.07%. Sara Devereux, Global Head of Vanguard Fixed Income Group had this to say about the launch, “The Vanguard Short-Term Tax-Exempt Bond ETF is built to optimize tax efficiency for investors seeking to allocate to the shorter end of the municipal bond market. The new ETF complements our broad fixed income line-up and provides clients with another avenue to tap our municipal bond team’s talent and capabilities.”

Finsum:Vanguard expanded its tax-exempt bond ETF lineup with the launch of the Vanguard Short-Term Tax-Exempt Bond ETF (VTES), its first US-listed ETF launch in nearly two years.

Allan Roth, founder of Wealth Logic LLC recently penned an article for etf.com where he provided his opinion on direct indexing vs. ETFs. While direct indexing is forecasted to attract assets at a faster pace than ETFs, according to a recent report by Cerulli Associates, Roth believes that direct indexing is not better than ETFs. While he does mention the benefits of direct indexing such as tax advantages, customization, and low annual costs, he asked, “But is direct indexing better than ETFs?" He added, "Generally they are not, in my view, at least not compared to the best ETFs.” He uses the S&P 500 as an example. Vanguard’s VOO ETF has a 0.03% annual expense ratio, while direct indexing typically has an annual fee of at least 0.40% annually. Roth does say that the 0.37 percentage point differential could be made up from the benefit of tax-loss harvesting in the early years, but he believes it likely won’t continue. That is because the stock market “generally moves up in the long run, so each year there is less and less tax-loss harvesting. Yet the fees continue.” In addition, after a few years, he says that “the tax benefit is minimal, and all that is left are fees and complexities.”

Finsum:Financial planner Allan Roth recently wrote an article for etf.com where he stated that direct indexing is not better than ETFs since direct indexing is more expensive and its tax benefits are minimal after a few years.