AltaVista Research has unveiled new functional tools to help advisers better understand the underlying investment risks in exchange-traded fund (ETF) selection, as well as provide greater clarity around stock overlap between ETFs and identifying individual stock exposures.
According to Michael Turner, head of sales and corporate development at AltaVista Research, the tools were introduced in a bid to enhance the process of selecting the most appropriate ETF for the required investment exposure, with only a handful of ETFs currently tracking the same index.
“The beauty of ETFs is the transparency of their underlying assets and [you] should know much more about how ETFs from the same peer groups actually compare,” Turner said.
“The new tools also assist with global asset allocation decision-making.”
Of the 33 pure Australian equities exposure ETFs researched by AltaVista, only six were seen to use the same benchmark and none from the ASX 200 peer group use the same index
The findings argue that a more effective use of ETFs will come about when advisers can select from a “more diverse universe” of ETFs from all issuers and where they are able to readily identify which ETF provides the most appropriate investment exposure as per the client’s needs.
“We contend these tools further allow for the better testing, setting and re-engineering of approved product lists (APLs) for dealer groups. Often ETF APLs are still too simplistic in nature and nowhere near broad enough to meaningfully allow ready and practical use at adviser level,” Turner said.
“It’s all about having greater knowledge and flexibility of that knowledge of the underlying investment exposure [to drive] better client outcomes.”
