At ETF Portfolio Management (ETF PM), we constantly research new trends to create leading investment portfolios. Early this year, we launched new passive core portfolios that have significantly outperformed many of the world’s top investors.
Experienced investors understand that passive indexing is the leading investment discipline today because it often outperforms active investing. Therefore, ETF PM created InvestableBenchmarks.com to give investors strategically diversified core portfolios using leading index ETFs.
Last February, we updated the investable benchmarks to focus on income and growth portfolios, or “risk parity,” with long-term Treasuries for fixed income. Long-term Treasuries have consistently delivered important portfolio protection when equities have crashed, and this enables the disciplined use of leverage.
Past performance does not guarantee future results. Worst year data since 2000.
Over the past 10.8 years, we estimate that our Income & Growth (IG) portfolio materially outperformed the ETF growth portfolio recommendations from Warren Buffett and David Swensen, two of the world’s leading investors.
Since the risk in disciplined income and growth is typically far lower than a growth portfolio, ETF PM created new versions with leverage. These portfolios attempt to materially enhance performance by using leverage prudently.
It is most impressive to note that our Income & Growth 3x (IG 3x) portfolio is a balanced investment solution, employing moderate leverage, that has consistently performed extremely well, including gains of 74% in 2014, and 2% in the crash of 2008.
ETF PM’s efficient asset allocations appear even more attractive when you consider their passive investment process and historical return estimates versus leading hedge funds. See the “risk parity” All Weather portfolio, run by Bridgewater, the world’s largest hedge fund manager.
In 2013, Bridgewater’s All Weather portfolio returned -4%, while IG 3x gained 29%. Many investors are now employing leverage in risk parity including AQR, and BlackRock, the world’s largest asset manager.
At ETF PM, we are cautiously shifting clients towards disciplined income and growth portfolios with leverage and trend following risk controls. Investors understand buying homes and cars with leverage, and learning to use leverage on their investment assets is the next step.
Still, past performance is never a guarantee of future results, and leveraged ETFs often do not deliver the exact multiple of the underlying index return they target. In fact, leveraged ETFs may underperform materially in “choppy-sideways markets.” Therefore, as always, investors should be very careful to engage leverage slowly and cautiously.
While the ETF investable benchmark portfolios have delivered exceptional performance, we still encourage investors to employ active trend following risk controls when making portfolio allocations using leverage.
Note: ETF PM is working to find the right strategic partner(s) to scale InvestableBenchmarks.com into an ETF of ETFs fund family. The investable benchmark portfolios are currently offered via separate client investment accounts. Contact us to learn more.