Ibbotson, a registered investment adviser (RIA) and wholly owned subsidiary of Morningstar, Inc.,will also develop a set of tax-sensitive model portfolios that are optimized to produce low tax liabilities for investors, according to a Morningstar release. All of the portfolios are designed for use by financial advisers within ING Financial Advisers, an RIA.
This initiative is an extension of an existing relationship between ING and Ibbotson, which serves as an independent consultant to ING.
“The ING Momentum ETF Strategy program is a unique approach combining investment techniques and utilizing low-cost ETFs in a way that brings value to our clients,’ said Ronald Barhorst, president of ING Financial Advisers, LLC, in the release. “We have found that higher net-worth investors who understand equities are seeking exposure to more market segments and asset classes for their retirement and longer-term portfolios. The use of ETFs with broader asset allocations is a potential solution to provide greater market exposure.’
According to the company, Ibbotson’s active ETF portfolios range from conservative to aggressive, starting with a strategic asset allocation to an extremely diverse set of asset classes, similar to the most sophisticated institutional portfolios. Next, Ibbotson ranks the asset classes in the active ETF portfolio based on performance. The top asset classes are overweighted while the bottom asset classes are underweighted to try to capture the momentum effect in the stock market.
The portfolio comprises 20 asset classes, including traditional domestic and international equity and fixed income, as well as domestic and international real estate investment trusts, listed private equity, emerging market bonds, small-cap international equity, commodities, treasury inflation-protected securities, and high-yield bonds.
“A large body of academic work suggests that asset returns have some degree of predictability. Our dynamic momentum methodology used in these active ETF portfolios is designed to take advantage of this market behavior,’ said Peng Chen, president of Ibbotson Associates.
Tax Sensitive Strategy
The ING Wealth Management Tax Sensitive Strategy is aimed to minimize the tax effect on a portfolio while taking appropriate risk levels. Ibbotson selects the funds according to its proprietary tax-efficiency measure when constructing the asset allocation policy, according to the release.
“We can’t control the gyrations of the market, but we can create portfolios that are diversified and tax efficient to help investors achieve more stable performance and keep more of the returns,’ Chen said.