Active strategies take the lead in portfolio construction

Active management continues to be a key theme in ETFs and modern portfolio construction for investors today, says Greg Gipson, managing director and head of ETFs at CIBC Global Asset Management.

“The first generation of these active strategies were more on the covered call, or derivatives type strategies, but now what we’re seeing is the incorporation of traditional, fundamentally driven active strategies in an ETF wrapper,” Gipson said in a May 29 interview.

With this evolution comes more opportunities to fine-tune investor portfolios, including adding a tilt to geographies like Canada or the U.S., large- and small-cap exposures, or value versus growth strategies, he said.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Global Asset Management.

Gipson suggested investors start with a core portfolio and then use ETFs to adjust exposures based on their objectives, including geographic preferences, company size or investment style.

Retail investors now also have more choice, including access to managers that traditionally were only available to institutional investors — a trend he sees continuing in the future.

“If we look out over the next five to 10 years, what do we think? We think that the use of ETFs, and the delivery mechanism — the liquid, transparent, continuously priced vehicle for investors to implement their view — will only continue to grow,” he said. “Because of that growth, we see and believe that ETFs will only become an increasingly larger proportion of the average investor’s portfolio.”

Gipson said continued innovation in ETFs should expand the range of investment options available to investors while preserving many of the characteristics that have fuelled the industry’s growth, including pricing efficiency, liquidity and transparency.

He pointed out that CIBC Global Asset Management recently launched four Counterpoint Global ETFs, all of which are actively managed, focusing on high-conviction and long-term value creation through growth and permanence strategies. While the growth strategies target high-potential companies going through change, the permanence strategies focus on more established businesses.

Gipson said the strategies are intended to complement core portfolio holdings rather than replace them.

This article is part of the Advisor To Go program, sponsored by CIBC Global Asset Management. The article was written without input from the sponsor.