Advisors turn to ETFs for Risk Management
TORONTO, Nov. 30, 2012 /CNW/ - Financial advisors expect to see increased use of exchange-traded funds (ETFs) in client portfolios, while aversion to risk remains high, according to a recently released Invesco Ltd. market study of U.S. registered investment advisors (RIAs).
Invesco's Canadian subsidiary, Invesco Canada, offers 14 ETFs under the PowerShares Canada brand.
Advisors surveyed believe ETFs will make up 24 percent of portfolio allocations over the next 12 months and 33 percent over the next three years, representing a 10 percent increase over results reported in Invesco's survey of advisors in 2011.
Against a lingering backdrop of global economic uncertainty, advisors still see clients remaining vigilant in their aversion to risk as 91 percent believe their clients are more interested in minimizing losses than maximizing gains.
"This year's study continues to show how financial advisors are embracing the value of ETFs and the many ways they can be implemented in their clients' portfolios," said Michael Cooke, Head of Distribution, PowerShares Canada. "But even as many equity markets have shown signs of strength year to date, advisors are still indicating that risk management is a primary focus and they are looking to a variety of products, including alternative assets, to manage risk."
The survey also found a growing appetite for complex strategies, such as smart-beta ETFs, but broader adoption will require more education on how these strategies can best serve investors.
"ETF adoption rates in the U.S. have tended to lead those in Canada by several years, suggesting that ETF usage can be expected to continue among Canadian advisors. But this growth in adoption will require education - an area where PowerShares Canada has become a leader," said Cooke.
With such issues as portfolio allocation and risk management in mind, Invesco Ltd. partnered with Cogent Research LLC to conduct its second blinded study to learn what is top of mind for advisors and their clients given current market conditions.
Among other key findings in the Invesco study:
Advisors continue to blend active and passive funds in a single
Forty percent of financial advisors agree that now more than ever they are creating portfolios using a blend of active investment vehicles and passive ETFs. Less than a quarter of advisors use an exclusively all active management portfolio (24 percent) or an all ETF/passive management portfolio (19 percent).
Risk management remains a priority
Consistent with the 2011 survey, advisors cite managing risk as a predominant philosophy in managing client assets (40 percent). The survey showed wealth preservation as the most important issue for clients, followed by mitigating risk.
Risk management investment strategies have not changed
Advisors continue to mitigate risk in client portfolios by creating a blended asset allocation of active investments and passively managed ETFs (62 percent) and applying a more conservative asset allocation (56 percent).
Alternatives, emerging market equities and large-cap funds drawing more
Within actively managed mutual funds, advisors are most likely to increase capital over the next 12 months in alternatives (46 percent), emerging market equities (43 percent) and U.S. large-cap funds (40 percent).
About the Invesco RIA Market Research Study
The RIA Market Research Study was conducted for Invesco Ltd. by Cogent Research in late August and early September 2012. The study is based on a survey of financial advisors around the United States with an average of $478 million in investable client assets. Cogent Research is not affiliated with nor employed by Invesco.
A white paper featuring additional, detailed findings from the study is available at http://www.invesco.com/auth/pdf/RIA-SURVEY-WP-3.pdf
To address concerns advisors have regarding risk management, Invesco Canada launched "Invesco Institute" seminars nationwide earlier this fall. These sessions provide advisors with risk education, risk-aware implementation ideas and programs to help them effectively speak to clients about risk topics. Advisors are asked to contact their Invesco Sales representative for more information about opportunities in their region.
About Invesco PowerShares
Invesco PowerShares Capital Management LLC is Leading the Intelligent ETF Revolution® through its family of more than 140 international and domestic ETFs, which seek to outperform traditional benchmark indices while providing advisors and investors access to an innovative array of focused investment opportunities. With franchise assets of more than US$65 billion as at June 30, 2012, PowerShares ETFs trade on both the New York and NASDAQ stock exchanges in the U.S. as well as the S&P/TSX Composite Index in Canada. For more information, please visit us at www.powershares.ca.
Invesco Canada Ltd., operating under three distinct yet complementary product brands (Trimark, Invesco and PowerShares), is one of Canada's largest investment management companies. A subsidiary of Invesco Ltd., Invesco Canada offers a diversified suite of investment solutions to institutions, organizations, companies and individual investors across Canada and around the world. Invesco Ltd. is a leading independent global investment management firm dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our retail, institutional and high-net-worth clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.
About Cogent Research
Cogent Research helps clients gain clarity, obtain perspective and formulate direction on critical business issues. Founded in 1996, Cogent Research provides custom research, syndicated research products and evidence-based consulting to leading organizations in the financial services, life sciences and consumer goods industries. Through quality research, advanced analytics and deep industry knowledge, Cogent research delivers data-driven solutions and strategies that enable clients to better understand customers, define products and shape market opportunities in order to increase revenues and grow the value of their products and brands.
Commissions, management fees and expenses may all be associated with investments in exchange-traded funds (ETFs). ETFs are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from Invesco Canada Ltd. at www.powershares.ca.
Most PowerShares ETFs seek to replicate, before fees and expenses, the performance of the applicable index, and are not actively managed. This means that the sub-advisor will not attempt to take defensive positions in declining markets but rather continue to hold each of the securities in the index regardless of whether the financial condition of one or more issuers of securities in the index deteriorates. In contrast, if a PowerShares ETF is actively managed, then the sub-advisor has discretion to adjust that PowerShares ETF's holdings in accordance with the ETF's investment objectives and strategies.
There are risks involved with investing in ETFs. Please read the prospectus for a complete description of risks relevant to the ETF. Ordinary brokerage commissions apply to purchases and sales of ETF units.
PowerShares Canada is a registered business name of Invesco Canada Ltd.
Invesco is a registered business name of Invesco Canada Ltd.
*Invesco® and all associated trademarks are trademarks of Invesco
Holding Company Limited, used under licence. PowerShares®, Leading the
Intelligent ETF Revolution®, and all associated trademarks are
trademarks of Invesco PowerShares Capital Management LLC (Invesco
PowerShares), used under licence. Trimark®, Knowing Pays® and all
associated trademarks are trademarks of Invesco Canada Ltd.
© Invesco Canada Ltd., 2012
SOURCE Invesco Canada Ltd.