Tuesday, October 3, 2017

4Q Rebalancing - ETFG Dynamic Model Portfolios

Tuesday, October 3, 2017 - With the beginning of the new quarter yesterday, the ETFG Dynamic Model Portfolios (4 Base Portfolios and 8 “Tilts”) were reconstituted and rebalanced - this always occurs on the 1st Monday of each calendar quarter.  The turnover within each allocation group was relatively low this quarter with only a few new products added.

Most of the changes within the Domestic Equity allocation involved relative ranking changes with the JPMorgan Diversified Return US Mid Cap (JPME) moving down while the Guggenheim S&P Smallcap 600 Pure Value (RZV) moved up a slot. The PowerShares DWA SmallCap Momentum (DWAS) fell out of the portfolio and was replaced with the VictoryShares US Small Cap High Dividend Volatility Weighted (CSB) ETF. The new selection continues two trends within our models, overweight to Small Cap exposure vs. Large Cap exposure and the selection of “Strategic” Beta products over Market Cap based ETFs.

The Developed International allocation continues to slightly overweight value but with a slightly different tilt with the switch out of the iShares MSCI EAFE Value (EFV) into the VanEck Vectors Morningstar International Moat (MOTI) ETF. The iShares Edge MSCI Multifactor International (INTF) and iShares MSCI South Korea Capped (EWY) remain the top multi-region and single country ETFs respectively. The iShares MSCI Canada (EWC) ETF was replaced with the iShares MSCI Spain Capped (EWP) ETF giving the portfolios a slight overweighting to Europe.

The Emerging Market allocations stayed the same with the portfolios holding the Franklin LibertyQ Emerging Markets (FLQE) ETF and the First Trust ISE Chindia Index (FNI) for the more aggressive models.

Over the past few quarters, we continue to see Strategic Beta products being selected into the portfolios across all of the equity allocations. This is not a discretionary process driven by the research team but rather, the selection of products driven by our rules based process that utilizes the ETFG Quant Model. It will be interesting to see if this trend continues.

About ETFG Dynamic Model Portfolios
Each ETFG Dynamic Model Portfolio is comprised of the top ETFs as ranked by the ETFG Quant Model and the firm’s Research Policy Committee and reselected each quarter. The eligible selection pool for the Model Portfolios is the universe of U.S. Listed ETFs and thereby represents the broadest range of industry groups, sectors and geographic regions.

All information including Selection Process, Components, Asset Class, Geographic and Focus exposure for the ETFG Model Portfolio Program is available under the "Model Portfolios" tab at www.etfg.com and can be actively tracked and downloaded by signing up for the 21 Day Free Trial

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