When thinking about a client’s core portfolio, we believe that the Future is Unknowable and that Evidence, not Hope, should drive decision making. As such, we do not believe in timing the market or building concentrated portfolios that take unnecessary risks.

Our ETF portfolios reflect this philosophy. By using ETFs to build exposure, we are able to:

• Instantly create the exposure we want
• Diversify portfolios to avoid large and risky bets
• Keep fees low by minimizing transaction costs and manager fees

We build 2 types of ETF portfolios:

Core ETF Portfolios

These portfolios are designed to obtain diversified global exposure at low cost allowing investors to “set and forget” their exposure. We customize these portfolios on several dimensions after lengthy discussions about objectives and goals for investment:

• Risk tolerance – should a portfolio be 100% equity, 100% fixed income or something in between? This is driven by clients’ life and wealth stage, investment objectives and personal preference.
• Currency – what is the ultimate home, or spending, currency? How much of the portfolio should be hedged? We currently offer Core ETF portfolios in USD, GBP, EUR and AUD.
• Tax – should the portfolio be tax aware? Is the owner of assets subject to capital gains, foreign withholding taxes, income taxes? We have the ability to customize to client needs and often find this to be a great source of efficiency gains.

These portfolios seek global diversification and an excess return over global equity and fixed income markets over the long-term. No short-term trading here. We categorize positions into 3 buckets to achieve our desired outcome in a risk-controlled way:

• Core exposure – typically the bulk of a portfolio, implemented via 2-3 ETFs to own the market.  Where possible, we implemented via ESG ETFs to benefit from overall quality and lower event risk of ESG screens.
• Style exposure – implemented via ETFs that provide a specific style tilt, such as value, quality, momentum, lower volatility, or size. Market & economic conditions dictate which style outperforms in the short-term, but over the long-term these academically proven tilts improve returns.
• Thematic exposure – off-benchmark exposures that capture medium-term trends or major market transitions on which our team has a high conviction view. Recent examples include energy sustainability, or the emergence of China’s tech ecosystem.

Thematic ETF Portfolios

Clients often want to obtain exposure to a specific theme or region, but either do not want to concentrate exposure, or do not have sufficient funds to allocate directly. That’s where our thematic ETF portfolios come in.  From building an Asia tilt, to targeting commodity or real estate exposure, we are able to design the right portfolio for the task. These ETF portfolios are standalone – they may complement exposure elsewhere, but they are not driven by clients’ risk objectives. They provide specific exposure and are used by clients when they have a high conviction view.

After defining ETF portfolio goals, the next critical step is ETF selection. This is often overlooked by investors, with many simply choosing a ticker they remember or one that they find from a google search. However, we believe there is a benefit to seeking out the right ETF for each job in a portfolio and as such spend significant resources on our ETF selection process.

Once the desired exposure is determined, we identify all ETFs available globally that could potentially provide that exposure. Each ETF is then screened a variety of characteristics:

• Benchmark – which benchmark is the right one for desired exposure?
• Cost – how much does it cost to hold and trade?
• Liquidity – how easy is it to trade on-screen or over the counter?
• Tracking quality – how well does it track its benchmark?
• Tax – what taxes does it pay on its investments? What taxes will our client pay on the ETF itself?
• Structure – is the legal setup and domicile appropriate for the client? Does it use derivatives, or lend its securities?
• ETF provider – what’s their track record, ability to solve regulatory or markets problems and how focused are they on investor protection?

Only after all ETFs are scored and the most suitable one is chosen, do we proceed to implementation. By quantifying and scoring ETF characteristics, we put our clients first in delivering a consistent and fiduciary approach to ETF portfolios, without regard to brand, or other non-client-driven considerations.

Learn more about our available ETF portfolios.