Multi-asset ETFs: Back in the spotlight

Jun 7th, 2016 | By | Category: Alternatives / Multi-Asset

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Active fund managers often tout their multi-asset strategies, which combine bonds, equities and other assets in one wrapper, as a clever and convenient way for investors to buy into a one stop shop solution and diversify their portfolios. However, investors might not be aware that this multi-asset strategy is also available in an exchange-traded fund form.

SCM Private and Deutsche Bank team up to launch active multi-asset ETF

SCM Private and Deutsche Bank’s ETF platform db X-trackers launched an actively managed multi-asset ETF, but it closed last year.

The multi-asset ETF sector was pushed back into the spotlight last month as global index provider STOXX launched a four-strong range of multi-asset indexes, which could be used as the underlying index for an ETF. They aim to replicate the EURO STOXX Corporate Bond Index for fixed income exposure and the EURO STOXX 50 Equity Index for stocks, with allocations to both asset classes ranges from 80% to 20% depending on the investor’s risk appetite.

The launch could give ETF providers much needed food for thought after the db X-trackers SCM Multi-Asset UCITS ETF, one of the few such funds on sale in Europe, delisted in August 2015. At the time SCM Private founder Alan Miller defended the fund, saying its $5 million in assets made it sizeable enough to compete and it had returned 18% growth since launch in 2012.

But the multi-asset ETF sector could be coming back to market after German bank ComStage launched the Vermoegensstrategie UCITS ETF (F701) in April –  a multi-asset fund of funds, which covers equities, bonds and commodities. It costs just 0.25%, significantly undercutting the competition.

If investors are keen for a fund with a longer track record, there are a few options in Europe for ETF investors to pick from, including from providers State Street and db X-trackers.

The db X-trackers Portfolio Total Return UCITS ETF (XQUI) launched at the tricky time of November 2008 and yet has since grown to €227.2 million in assets. It is not only multi-asset but is also a fund of funds strategy, like the new fund from ComStage. The synthetically-replicated fund tracks the performance of 12 ETFs, ranging from high risk emerging markets to low risk money markets, and from global dividends to Eurozone sovereign yield.

Overall the fund is weighted towards equities at over 60% of the fund, so would suit a so-called “balanced” risk investor.

At 0.72% in fees, it doesn’t come cheap, but remains in the black performance-wise. Over five years it has delivered 5.51%, and 8.9% over the last year in euro terms.

db X-trackers also offers its Portfolio-Income UCITS ETF (XS7W) for the lesser fee of 0.65%, but still 0.40% more expensive than the ComStage offering. It launched in February 2011 and has €22.2 million in assets. This fund may be less liquid but it is physically replicated, and has over 50% dedicated to fixed income and money markets. It has delivered 4.37% returns over five years, and is up about 0.5% in one year, both in euro terms.

Both XS7W and XQUI have failed, however, to beat the db X-trackers MSCI World Index UCITS ETF’s 12.03% over five years in euros.

Compared to a global fixed income ETF, the multi-asset ETFs fared a little better, coming in at around the same rate as the iShares Global Government Bond UCITS ETF (EUN3)’s positive 5.14% in euro terms.

In a slightly more niche category, State Street Global Advisors offers a one-stop-shop solution within infrastructure. The $48 million SPDR Morningstar Multi-Asset Global Infrastructure UCITS ETF (GIN) launched in April last year and holds equal weights in bonds and shares. It has returned just over 4% in sterling terms over the past year, and has an annual fee of 0.40%.

 

 

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