RFG Advisory, the Birmingham, Ala.-based hybrid RIA platform with $6.5 billion in assets, has launched a suite of actively managed exchange traded funds, designed to address a client’s entire asset allocation portfolio.
The Bluemonte ETFs will be available to all advisors, regardless of whether they’re affiliated with RFG. But the firm will initially market them to its own network, which currently includes about 125 advisors across 67 teams.
RFG partnered with Exchange Traded Concepts, which handles the day-to-day trading, and SEI for distribution, to launch the ETFs.
The ETFs were born out of Bluemonte Investment Management, the internal investment management arm for RFG, which is run by RFG President and CIO Rick Wedell. That division was launched in 2017, with about $200 million in client assets. It now manages $2.5 billion. Wedell expects about $1.4 billion of those assets to move into the ETF structure.
“A lot of different wealth managers that are out there use what I’ll call more of a ‘best of breed’ approach,” Wedell said. “You select the best value manager you can find or the best growth manager you can find. And frequently, that means that you’ve got different parts of the portfolio being actively managed by different portfolio managers. And you can wind up with drift, and you can wind up with some other unintended consequences.
“We discovered that we could figure out a way to basically get a better asset allocation mix if we could have funds that were designed to be put together in specific ratios, but where the fund managers kind of knew what each other were doing.”
The suite includes five core equity funds, including a large cap core fund, large cap growth fund, large cap value fund, a global fund and a total market fund. On the fixed income side, there’s a short duration fund, a long duration fund, a diversified income fund, and a core bond fund.
“We can still get the ability to kind of rebalance and tax loss harvest over time to the extent that something goes on, we can do that and actually give the client the benefit of that,” Wedell said. “But we can take a lot of the normal day-to-day portfolio trading out of the client account, which should convey a benefit.”
Before joining RFG, Wedell spent 12 years at Bain Capital Credit, where he served as executive vice president and head of fixed income consumer investments.
The ETFs have an internal expense ratio of 25 basis points. That compares to an industry average of 39 basis points for active equity ETFs, according to CFRA research.
RFG CEO Shannon Spotswood said the suite of ETFs will help advisors maximize their time.
“As we analyzed all of that data in the industry about where advisors are getting bogged down, where the future of the industry is heading, it became increasingly clear that to provide this institutional caliber investment management was a real competitive advantage for advisors,” she said. “I think this is where the puck is headed: helping advisors get out from defining their value proposition as being a portfolio manager, but having a very attractive solution to be able to offer.”
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