Current ETF portfolios not good enough

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The popularity of ETFs is no-doubt increasing, but there is some valuable information being omitted, according to AltaVista Research.

Michael Turner, AltaVista Research head of sales & corporate development, says that it’s “not actively pointed out” that ASX domiciled ETFs allow for the construction of well diversified, cost effective and readily implemented ETF model portfolios across the major asset classes of domestic and global equities, bonds and cash.

Turner says that ETFs are best used in conjunction with a number of ETFs within a client’s portfolio.

“In practical terms, the use of just one or two favourite ETFs to gain, for example an Australian equities exposure, frankly just may not be good enough from a portfolio construction or client outcome perspective.”

AltaVista expected the use of ETFs to be faster than it has been, but says that business process changes involved are considerable.

“The argument to use ETFs has generally been about the product and implementation differences,” says Turner.

In response to these concerns, AltaVista has released a new version of its Portfolio Builder that allows advisers to blend their own ETF model portfolios using the universe of “plain vanilla” equities and fixed interest ETFs from all issuers.

Last week, State Street Global Advisors (SSgA), which holds the biggest share of the ETF market in Australia, launched a suite of ETF model portfolios via OneVue’s Unified Managed Account investment platform.  

Mark Wills, head of SSgA Investment Solutions Group for Asia Pacific ex Japan, said, “Tactical asset allocation is increasingly gaining traction in Australia, which in turn is fuelling retail investor appetite for model portfolios that employ tactical asset allocation.”

The suite is comprised of five risk-based models, ranging from high growth to conservative, and a flexible asset allocation model that incorporates a cash-plus approach with a focus on capital preservation when volatility occurs.

The SSgA model portfolios are tailored specifically for OneVue by SSgA and offer exposure to cash, domestic fixed income, domestic equities, international equities and alternatives.