Gregg Greenberg has an article up about a fund company that uses only ETFs in its funds. Their stock fund (as opposed to stock bond combo) is the AdvisorOne Amerigo Fund (CLSAX).
Here are the top ten holdings;
iShares MSCI Emerg Mkts (EEM) 14.28%
iShares Russell Midcap Growth (IWP)10.28%
iShares Russell 1000 Value (IWD) 10.05%
NASDAQ 100 Trust Shares (QQQQ) 7.70%
iShares MSCI EAFE (EFA) 7.05%
Vanguard Mid Cap VIPERs (VO) 6.29%
Consumer Staples Select Sector SPDR 5.69%
iShares Dow Jones Trannies (IYT) 4.80%
SPDRs (SPY) 4.07%
Vanguard Value VIPERs (VTV) 3.93%
This might be the first one of these funds that I have looked at that makes an attempt to capture certain effects using sector ETFs. I am also impressed by the willingness to have a lot of foreign exposure.
There are negatives as well. Yeah the fees, but that is not what I mean. Actually the fee is reasonable as the ETF fees is included in the 1.15% (this is the manager's description in the interview).
This might just be me and this may be unfair but as I read the part of the interview that addressed foreign there seemed to be something missing from their process. I can't point to anything specific, its just a feeling I got.
Assume my reaction is dead wrong, I would invite the managers to start a blog and share some process. If I am wrong and these guys really get it everyone comes out ahead.
The manager talks a little bit ETF selection and it seemed like there are a lot of narrow ETFs that they won't consider due to transparency (PowerShares).
Since they don't pick stocks it makes sense to think that they are top down managers. A big part of top down is sector allocation. I think it is tougher to manage sector weights using mostly broad based funds.
It is also difficult to really manage foreign with very broad products as this fund does.
I would lastly note the yield of the fund is only 0.07% (according to Yahoo Finance). While I think a drawback of an all ETF portfolios is low dividends this is really low (it does not get mentioned in the article but this might be what pays the fee).
I am still no fan of an open end fund that only uses ETFs but the interview was a chance to look at the product from the manager's perspective.
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3 comments:
Excellent information.
As an individual investor, the hard decision is should I invest myself or let professionals do it for me? There has been a lacking of a benchmark of professional caliber to compare to. We know S&P 500 is not a good benchmark because money market will have beat S&P 500 for the past 5 years! We also can not use the returns from Harvard and Yale's trust funds simply becasue options are rather limited for the individual investors.
CLSAX can provide a benchmark for a professionally managed equity portfolio. Since it is tracked by Morningstar you can get all sorts of stats. For example, the volatility(measured by standard deviation or Riskgrade) of CLASAX is slightly greater than for S&P 500. FUNDX(Funds upgrader) is another interesting example for benchmarking purpose.
It looks like an index fund pretending to be an asset allocation fund.
Some companies have a fund of funds. Now, we have a fund of ETFs. My take... Just do it yourself.
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