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CLS Investments Debuts Fee-Free “Smart ETF” Model Portfolios

The model portfolios are a combination of factor-based ETFs from five different providers, and no strategist fee.

If the race to zero is well underway when it comes to charging for asset management, the race to zero when it comes to creating asset allocation strategies is right there with it. On Tuesday, exchange traded fund strategist CLS Investments launched eight new “Smart ETF” models, which helps advisors build portfolios with a combination of factor-based ETFs from five different fund managers, without charging a strategist fee.

The model portfolios are composed of “smart beta” or factor-tilted ETFs, alongside smaller satellite positions in ETFs focusing on specific sectors, countries and alternative assets. According to CLS, the models are designed to focus on total return proportionate to an investors’ risk tolerance. 

The models will emphasize the use of factor-based funds, and CEO Ryan Beach said the majority of positions are multi-factor ETFs with single-factor ETFs used to tilt portfolios towards factors CLS deems attractive. 

“We believe that provides a higher degree of flexibility than any one multi-factor ETF especially as market conditions change,” Beach said. 

The Smart ETF models will be managed by the company’s “risk budgeting” methodology and an active asset allocation approach, which CLS says is governed by systematic research and the continuous measuring of risk.

“At CLS, we recognize that in our everchanging industry, offering low-cost solutions that add value to an investor’s portfolio is crucial for an advisory firm’s growth and success,” said Beach in a statement. “While zero-fee models traditionally contain allocations to only one provider or entity, CLS’s Smart ETF models will provide advisors with a solution that incorporates ETFs from multiple providers and align with the client’s Risk Budget and CLS’s active outlook.”

Deutsche Asset Management, First Trust, J.P. Morgan Asset Management, PIMCO and PowerShares by Invesco have all signed on to offer their products in the models. These providers will pay CLS a fee to have their ETFs utilized in the models, allowing CLS to offer the Smart ETF models with without a strategist fee. 

Smart ETF models will be available through Orion Communities (which is a subsidiary of NorthStar Financial Services just like CLS Investments), Envestnet, and FTJ FundChoice.

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