Advisers need to look beyond the “passive versus active” management debate surrounding exchange traded funds (ETFs) and look at their benefits in portfolio allocation, according to AltaVista Research.
The company’s head of sales and corporate development, Michael Turner, told InvestorDaily that the debate on using ETFs needs to move away from the decision about whether to use active or passive management.
“For us, it’s not a debate about active versus passive and I think that’s what a lot of advisers perhaps struggle with when adopting, or when they are thinking about using ETFs,” Mr Turner said.
“In the main, ETFs in a portfolio are really about delivering a transparent and cost-effective core exposure.
“ETF usage in portfolios is not about deciding to use active versus passive management; it’s about thinking about portfolio construction and looking at the full range of available product options for clients.”
AltaVista recently launched an Australian Tactical Allocation ETF-only model portfolio which uses a fundamental allocation approach in construction.
Mr Turner said this approach to proprietary research process will, in effect, offer active portfolio management using a passive ETF strategy.
“Our research approach is based on fundamental analysis of an ETF’s constituents,” Mr Turner said.
“We view ETFs as selections of stocks that track a nominated index, not as listed passive managed funds. And they should be researched as such.
“We don’t research synthetics, commodities or currencies as it’s difficult to quantify investment merit and cannot look forward in your assessment for those types of assets.”
Mr Turner said the new product offering will allow advisers to provide their clients with a better performance.
“Because of our proprietary research process and the benefits of ETFs as products in their own right, we contend that advisers are able to deliver a much better outcome for clients,” Mr Turner said.
