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ETF U: Designing the 60/40

Nicholas Peters-Golden

Feb 5, 2023

ETF U: Designing the 60/40

What’s the best mix of ETFs, and how best to build a portfolio with ETFs that complement each other? Asset managers came together to discuss the power of the ETF wrapper and how best to use it for the How to Build an ETF Portfolio panel Sunday at Exchange: An ETF Experience in Miami to discuss the virtues of the ETF, emceed by ETF Think Tank Director of Research Cinthia Murphy.

Joined by John Davi, Founder, CEO, CIO at Astoria Portfolio Advisors, Shana Orczyk Sissel, Founder, President & CEO of Banríon Capital Management, and Lisa Kirschner, Director of Research at Richard Bernstein Advisors, Murphy invited each panelist to share what they prioritize in their portfolios.

For Kirschner at RBA, that’s the profits cycle, looking to identify trends based on the directionality of profits in each market sector.

“We’re talking about accelerating and decelerating profits. We don’t care if profits are ten or twenty percent; we care which direction they’re going,” Kirschner said, describing how RBA also considers liquidity and sentiment for its ETF of ETFs-style funds.

RBA also x-rays strategies to look under the hood and see if they really do what they say they do, with transparency, a value shared by Sissel and Davi, as well.

Sissel, who has worked for the likes of Fidelity Investment Advisors, CLS Investments, and Orion Advisor Solutions, alternatives are a crucial part of her strategies. Through her work at Banríon and its OCIO services, Sissel aims to help advisors build alts portfolios that combine 40-Act funds and private products for clients able to access the latter category.

Although alts management remains somewhat of a challenge in ETFs due to limits on shorting and leveraging, they can still be a crucial piece of portfolios, acting as a powerful complement to an existing 60/40.

“I like to always fall back on the fact that even in the most mundane and least efficient way to access alternatives, which is in the ETF and mutual funds space, it still adds value,” Sissel said, shouting out the AGFiQ US Market Neutral Anti-Beta Fund (BTAL) as a standout example of an alts ETF that can diversify a 60/40.

The third panel member, Davi, explained the value of a five step checklist for advisors in building a portfolio, determining whether an investor is looking for income or growth, the level of acceptable active risk, the timing of the economic and inflation cycles, the cyclicality of factors like value and growth, and the most important, he said, is making sure you have the desired exposure with the right ETF tool.

Davi, whose firm Astoria Advisors manages the AXS Astoria Inflation Sensitive ETF (PPI), pointed to WisdomTree’s portfolio construction suite as one to consider, as well as ETF Action, while Sissel reminded advisors of the value of the likes of Factset and Morningstar Direct. Sissel also shared that her own firm, Banrion, is developing a portfolio construction tool that better incorporates alternatives and more interactivity between users.

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