Financial advisors and clients who may have been curious about exchange-traded fund managed portfolios but have been deterred by the lack of any objective rating or way to compare the performances of hundreds of these funds will soon have those tools at their disposal.
Morningstar, the Chicago-based fund research firm, Thursday announced plans to establish a ranking system and to begin research “later this year” on ETF managed portfolios, which are defined as separate account strategies that have more than 50% of a portfolio’s assets in ETFs.
In an interview with On Wall Street, Andrew Gogerty, Morningstar’s ETF managed portfolios strategist, said the research firm would probably make the rankings part available first, before beginning to offer research on the products, which would “likely come towards the latter part of this year.”
Gogerty said $22 billion in assets are currently held by 330 portfolios being tracked by Morningstar and with 30% of these having been launched in just the last three years – and more on the way -- “ETF managed portfolios are a burgeoning area.”
Yet, according to Gogerty, no research firm has been providing commentary, research and education -- much less a rating system -- to cover the area. Yet, he said, “These strategies typically offer greater tactical flexibility than a traditional individual security separate account strategy.”
“Our goal is to develop a suite of analytics and commentary that will help advisors and other investors who are sifting through these investment options,” he said, adding that the new project should “increase the awareness and transparency of this rapidly growing area of the industry.”
Morningstar plans to establish a proprietary classification system for ETF managed portfolios, which the company says will allow advisors to screen offerings based upon various portfolios’ strategy attributes, making comparisons among funds easier.
The ETF managed portfolios will, like other funds ranked by Morningstar, be ranked by performance against peers within their classification groupings. These classifications will differ from the existing Morningstar Category Classification systems which are currently applied to mutual funds, variable annuities and separate accounts based upon those funds’ underlying securities.
The rankings and research will be made available through Morningstar’s advisor and institutional products, including Morningstar Advisor WorkstationSM, Morningstar OfficeSM and Morningstar DirectSM.
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