The developing case for asset allocation ETFs


“You see this emotional roller coaster ride even in net investment income,” said Chandak. “If you look at the past two decades, you will find that buying tips when the market is rising and selling takes control when you see that market decline.”

Whether it is an aversion to loss or an aversion to regret, investors tend to make market timing mistakes in the face of volatility. Those that sold out during the brief bear market between March and April last year have likely seen massive losses. Deciding when to re-enter the market would also have been a difficult task. Between transaction costs, the stress of decision-making, and everything else, many of these investors are likely still licking their wounds, even as the broader market made a historically strong comeback to hit all-time highs.

“This discipline of sticking to an investment plan, not being put off by the headlines and just staying on course was an important element in weathering the turmoil of last year,” said Chandak. “When you put the rebalancing activity in the hands of someone else, you relieve yourself of the emotional and operational stress of rebalancing. That certainly helps to lessen the panic you feel as an investor right now. “

An important element for the reassuring quality of asset allocation ETFs is their transparency. Aside from clearly disclosing their holdings, providers are usually transparent about their methodology and the process of reviewing the mix of assets. In addition, institutions like banks and large independent managers like Mackenzie can thrive on ongoing product support and information.

“With KYP playing a bigger role with the upcoming customer-centric reforms, consultants want the convenience of getting answers today,” said Chandak. “They want to know that, as an ETF manager, you are doing the right thing in portfolios, and you want to keep them updated on how you are changing your products and how that might affect investors. We feel that partnering with consultants is very important and that is a core element of our business. “


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