There is no single recipe to building an ETF portfolio. But understanding how a portfolio is built is key to picking the right one. And choices certainly abound, with hundreds of ETF strategist portfolios commanding nearly $100 billion in combined assets today.
For that reason, we are setting out to better understand how ETF strategists go about creating these portfolios in a series of interviews that look under the hood of some of the ETF portfolios available to retail, institutional and advisor clients alike.
Portfolio: CKW Opportunistic Global Balanced
Provider: CKW Financial Group, Honolulu
Who We Talked To: Carl Choy, principal, CKW
Portfolio AUM: $275 million; the firm’s total AUM is around $1 billion
Primary Goal: The portfolio is built on the idea that a dynamic asset allocation can produce incremental returns over the long term. The benchmark for this strategy is a 65/35 mix of MSCI World Stocks and Barclay’s Int. Government Credit Bonds. The portfolio seeks to reduce risk and keep expected returns because downside risk is more damaging over the long term than not making as much over time.
Methodology: The portfolio uses as dynamic asset allocation process. Starting out with the 65/35 mix, the process allows the portfolio to underweight as much as 25% of what is in the benchmark, tilting part of that allocation more toward equity or more toward fixed income as it sees fit, and part into more “opportunistic” assets.
CKW reallocates portfolios based on arbitrary dates. The investment selection process focuses on broad passive ETFs.
Target Client: Institutions and advisors looking for a core 65/35 portfolio in which to blend alternatives and individual investment satellites to meet their own or their clients’ needs.
Average Duration: 3.85
Average Bond Yield: 4.92
Average Port Yield: 2.72
% ETFs? 73.5% of portfolio
ETFs in the Portfolio:
iShares Core S&P 500 ETF (IVV)
iShares Core S&P Mid Cap ETF (IJH)
Int’l Global Equity
iShares Edge MSCI Min Vol Global ETF (ACWV)
iShares Core MSCI EAFE ETF (IEFA)
Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF)
iShares Core MSCI Emerging Markets ETF (IEMG)
Fixed Income: Currently all active mutual funds
Fees: CKW fees start at 1.25% and scales down for larger assets.
Performance: YTD +3.04% (gross)
Contact Cinthia Murphy at [email protected].