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        Model Portfolios: The Core Foundation

        • Model Portfolios continue to gain popularity both locally and abroad. In Australia investors can now select from 1,100 investment strategies.1
        • One third of current model portfolio users acknowledge this solution can be used to provide an effective portfolio core.2
        • Moreover, Australian advisers indicate on average they allocate 76% of their clients total investable assets into managed accounts.2
        2.5 min read
        Sinead Schaffer
        ETF Model Portfolio Strategist

        The plethora of investment products coupled with number of investors transitioning to retirement and the intergenerational wealth transfer calls for expert guidance.

        Guiding clients’ financial lives requires significant time and resources — from understanding their goals and risk tolerance to defining their investment objectives; assisting with tax, education and estate planning; and navigating a host of personal and family issues. As assets grow, finding the time to serve clients and attract new business can become complicated.

        On average, advisers are spending more time on portfolio management (23.1%) than on either client-facing activities (14.7%) or prospecting new clients (11.3%).3 This does not reflect the priorities identified most often by advisers: deepening relationships with existing clients and acquiring more clients. A growing number of advisers are embracing model portfolios to improve operational efficiency and respond to client needs. They are selecting model portfolio solutions that fit their business and align with their investment management philosophy. Model portfolio users are getting more time back in their day to do what they do best, engage with their clients.

        The notion of a core-satellite strategy is not a new one. But where do model portfolios fit? Are they a core component or should they be used as a satellite? Many model portfolio users have chosen to implement models as a core allocation in clients portfolio. This approach achieves a core-satellite strategy by holding the model portfolio as a “core” holding, which is a relatively diversified pool of cost effective investments, where additional investments can be added as a “satellite” positions around their core in the hopes of generating alpha. In Australia one third of financial advisers have implemented a managed account as a core portfolio holding for their clients portfolio.2 We believe a large driver for using models as core is cost effectiveness. Adviser can manage the costs associated with investing, without detracting from performance.

        Core Portfolio Considerations

        1. How much of the clients portfolios is the core?
        2. Correlation between core assets and satellite assets.
        3. Investment Approach for core and satellite assets. How do you cohesively articulate this combination?

        Looking to implement a core satellite model portfolio strategy?

        Speak with the State Street Global Advisors to understand the best way to implement a model portfolio as a core. We can provide correlation analysis between the core and satellite to provide confidence when implementing a core satellite approach.

        More On Model Portfolios

        Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL"). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com/au.

         

        SSGA, ASL is the issuer of interests and the Responsible Entity for the ETFs which are Australian registered managed investment schemes quoted on the AQUA market of the ASX or listed on the ASX. SSGA, ASL is the AQUA Product Issuer for the CHESS Depositary Interests (or "CDIs") created over Interests in SPY which were first quoted on the AQUA market of the ASX on 13 Oct 2014.  State Street Global Advisors Trust Company (ARBN 619 273 817) is the trustee of, and the issuer of interests in, the SPDR® S&P 500® ETF Trust, an ETF registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and principally listed and traded on NYSE Arca, Inc. under the symbol "SPY". This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure statement available at www.ssga.com/au, before deciding whether to acquire or continue to hold units in an ETF. The Target Market Determination is also available at ssga.com/au. This material should not be considered a solicitation to buy or sell a security. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF's net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index. Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss. SPDR®, Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC, ASX® is a registered trademark of the ASX Operations Pty Ltd, these trademarks have been licensed for use by S&P Dow Jones Indices LLC and sub-licensed for use to State Street Global Advisors, ASL. MSCI indexes are the exclusive property of MSCI Inc.(“MSCI”). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street. SPDR products are not sponsored, endorsed, sold or promoted by any of these entities and none of these entities bear any liability with respect to the ETFs or make any representation, warranty or condition regarding the advisability of buying, selling or holding units in the ETFs issued by State Street Global Advisors, ASL. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA, ASL’s express written consent.  

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