Vanguard topples Charles Schwab in ETF managed portfolios league table

Aug 8th, 2018 | By | Category: Alternatives / Multi-Asset

Vanguard has knocked Charles Schwab off the top spot in Morningstar‘s league table of US firms by assets under management in ETF managed portfolios.

Vanguard Charles Schwab ETF Managed Portfolios

According to Morningstar data, there was $121.9bn in AUM across 1,234 ETF managed portfolio strategies from US firms, as of the end of Q1 2018.

According to its latest ETF Managed Portfolios Landscape Report, which covers the first-quarter of 2018, Morningstar gives the number-one slot to investment giant Vanguard after Charles Schwab suffered net outflows and assets previously temporarily omitted (due to M&A activity) were re-incorporated into the Vanguard figure.

As of the end of the quarter, the investment giant had AUM in ETF managed portfolios of nearly $12.7 billion across 44 strategies, representing quarter-over-quarter (q-o-q) growth of $1.8bn.

Charles Schwab, meanwhile, lost $450m to end the quarter with AUM of $12.0bn.

The next three largest firms by total ETF managed portfolios AUM are BlackRock ($8.6bn AUM; $740m q-o-q growth; 59 strategies), RiverFront ($6.7bn; $121m; 17), and SEI Investments ($5.3bn; $540m; 16).

BlackRock, the asset manager behind the iShares brand of ETFs, added 19 strategies to its stable of ETF managed portfolios during the quarter. Many of these are tax-aware versions of its strategic asset allocation portfolios.

The Morningstar report tracks 1,234 strategies from 189 US-based firms. To be eligible for inclusion, a strategy must have more than 50% of portfolio assets invested in ETFs.

While Morningstar has previously noted that these portfolios represent one of the fastest growing areas of the managed-account universe, the latest data shows that total AUM in the ETF managed portfolios segment decreased by less than 1.0% during the period, to $121.9bn.

However, the investment research house points out that the majority of the decline was attributable to the removal of one large strategy from its database – Clark Navigator Fixed Income – which is no longer eligible for inclusion in the universe after the portfolio dropped below 50% of cash-adjusted assets invested in ETFs.

Technicality aside, Morningstar reports that growth across the segment remained strong with the 25 largest firms in the universe increasing assets by $2.6 billion versus the prior quarter—owing to a combination of organic growth and the addition of new strategies to the database.

Richard Bernstein Advisors, the eponymous firm founded by the former Merrill Lynch & Co. Chief Investment Strategist, experienced the greatest organic q-o-q growth, as assets in its strategies increased $870m, representing 24% growth versus the prior quarter.

Twelve of the 20 strategies with the largest q-o-q percentage increases in assets were vanilla stock/bond strategic asset-allocation portfolios, reflecting a continuation in the shift of investor preferences in this space that was spurred by the implosion of a handful of high-flying tactical strategies just a few years ago.

Demand from financial advisors has also played a key role in the universe’s AUM growth and is being driven by multiple factors, says Morningstar. The fiduciary standard continues to move forward as the baseline philosophy for managing client portfolios, and, as a result, growth in the fee-based model is tilting portfolios toward lower-cost, broad-based investments for a larger part of client portfolios, with a focus on asset allocation

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