The number of exchange traded funds (ETF) being brought to market has highlighted the movement toward alternative vehicles to traditional equities, according to an ETF investment strategist.
This development has created greater flexibility and an open thought process around investor portfolios, BetaShares head of investment strategy Drew Corbett said.
“What a lot of advisers are doing right now is, we’re seeing them move allocations, such as moving into the US dollar as a cash allocation within their international portfolio,” he said.
“That’s one of the biggest plays that we’re seeing advisers do. People don’t have to take equity exposure anymore. They can diversify into US dollar cash without having to worry about Europe causing their returns to be negative due to equity markets.”
Corbett said he is seeing more confidence in advisers’ implementation of ETFs.
“The thought process around investor portfolios has just been opened up substantially because of the ETFs now available to them,” he said.
“Now they’ve got all this flexibility in what they can do [through using] ETFs as a tool.
“We’re seeing model portfolios using them more and more. They needed us to bring these different asset classes [to market] so that they would have portfolio applications.”
Corbett said in light of the current environment, clients are requesting advisers show them assets that will give them real diversity to deliver positive returns in 2012.
He said the market needs products that will continue to provide access to asset classes that are becoming mainstream overseas and increase the options available in asset allocations.
“If we think of commodities being one of the positive performing asset classes in 2012, advisers can now do that in an ETF, without [resorting to] a structured product or something with full counterparty exposure,” he said.
“That’s where they can add value to their clients – they can now build a diversified portfolio to help investments and generate return.
“I’ve had a lot of adviser meetings and they’re very interested in the portfolio-diversification attributes of agriculture and the commodities basket for the medium to longer term portfolios.”
Corbett confirmed at least three product launches in the first quarter of 2012 while continuing to observe the “supply and demand gaps” in portfolios.
The BetaShares commodities basket ETF allows access to a diversified commodities index tracking the futures performance of 24 commodities, available to Australian retail and institutional investors as a single trade and launched on the Australian Securities Exchange (ASX) yesterday.
