One of the trends in ETFland is launching funds that fall under the banner of what I call ‘investable benchmarks’. Depending on your worldview and strategic asset allocation mindset, you may favor an endowment style portfolio (heavy in equties, global, with decent chunks in real assets). Or perhaps you fall under the risk parity spell (examine asset classes on a vol adjusted basis or economic regime basis, basically ends up with more in bond and usually requires leverage). Recent article on Dalio here.
In any case, after you come up with the initial allocation there is not a lot more to do with the portfolio than rebalance it every so often and upgrade funds when better or more representative ones come out. I am generally in favor of these portfolios being available to investors, but in no way do I think they should cost any more than 0.5% for a buy and hold allocation. And over time I expect them to converge to around 20 bps as the old high fee model dies a slow mutual death. Lots of these funds have garnered a ton of assets this year, and I was interested to see a filing the other day for a Permanent Portfolio ETF. If they are smart they will come in at a reasonable cost. But in general one can replicate these funds for free (and is why we put sample portfolios in our book for the buy and hold investor.)
We’re putting together a piece on dynamic risk parity (permanent falls under this banner I think) and endowment portfolios. Stay tuned!
