Time For The ETF Strategist’s Manifesto

June 23, 2015

 

Old Approaches Failed

During the difficult period of 2008–2009, many traditional investment practices failed to protect clients, naturally ushering in a frantic search for better solutions.

 

Indeed, the world has changed since the financial crisis. It’s now clear that the new investment landscape demands additional sources of diversification. Portfolios must be positioned to navigate muted growth in Western economies, recurring balance sheet issues and an emerging world that is swiftly moving to parity with the developed one.

 

This is the problem facing clients today.

 

Meeting A Need

ETF strategists have responded in force. They have taken the ETF—a “financial technology” really—and used it to build more robust portfolios. Rather than “picking stocks,” ETF strategists actively select themes, trends and sectors for outperformance.

 

This approach has become difficult to ignore. In a globalized world, the drivers of portfolio returns have increasingly been guided by macroeconomics and other “big picture” trends.

 

Looking ahead, the ETF strategist is moving from the boutique, entrepreneurial period to the institutionalization phase where they become formidable competitors to large-scale asset managers. This success was born of independent thinking, challenging conventional portfolio management practices.

 

Socrates would approve.

 

Big Changes In Money Management

And as these beliefs proliferate, they are driving significant organizational change in the asset management industry—moving away from siloed products using specialist managers to more holistic portfolio solutions featuring multi-asset-class managers using ETFs. The ultimate result is differentiated client portfolios that can thrive and withstand the shocks of a globalized, modern world. That’s real progress.

 

Where to next?

 

The medical industry has its own “Hippocratic Oath,” designed to uphold certain ethical standards. We need one too—a symbolic pledge that can be our North Star. Our hope is that this one will serve as a guiding light for the ETF strategist industry to the benefit of our clients.

 

So, without further ado, here is my industry’s equivalent of the “Hippocratic Oath.”

 

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