Ignore ETF Strategist ‘Perfect Storm’

July 07, 2015

You Can’t Measure What You Can’t See

Also, as noted above, there’s a lot going on that’s quite positive in the world of ETF strategists and ETF-focused asset allocation that’s hard to measure.

In other words, the Morningstar ETF strategist database, first created by Andrew Gogerty (who now works at Newfound Research) and now managed by Ling Hew, doesn’t come close to capturing the full extent of ETF model portfolios that are now part of the investment universe.

The Morningstar total is probably less than half the real number, according to Gogerty’s back-of-the-envelope calculation of all the strategies that he and his successor Ling Hew haven’t managed to aggregate in the quarterly report. Ling Hew confirms this estimate.

That means that anywhere from $175 billion to $200 billion is now in ETF model portfolios, Gogerty told ETF.com in a recent interview.

Think of all the ETF assets in wirehouses that are organized in model portfolios. Plenty of fund sponsors are getting into the ETF strategists space as well. In fact, Vanguard is one of those that reports its assets to Morningstar, though plenty, like BlackRock, don’t.

Twice As Much As You Thought

The point is this: ETFs are quickly coming to center stage and ETF model portfolios are growing as well, as more advisors begin using these types of portfolios so that they can concentrate on other aspects of financial planning or even on prospecting new business.

The Morningstar report, while valuable, is telling a tale that won’t soon repeat. More importantly, the report is likely capturing less than half the total. That means—if you believe Gogerty’s estimate of all the assets that aren’t being counted—total ETF strategist assets are really more like $200 billion, or 9 percent of the $2.114 trillion total, instead of $86 billion, or less than 5 percent of total ETF assets.

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