How do you pick an ETF model portfolio from the many options available in the market today? David Marshall and Robert Spencer discuss five key differentiators behind the State Street ETF Model Portfolios.
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DAVID MARSHALL: Today we're talking about differentiation. We know that you have several portfolios from which to choose. And when you look at those different portfolios, some of them seem very similar. And there's five fundamental ways that we believe our portfolios are differentiated. Starting off with number one, our quantitative approach. We've been managing portfolios since 1982.
It's given us the benefit of seeing multiple markets and how they react over time. We use a diversified team of investment professionals to help us identify return factors. In addition to that, we try to evolve over time. We don't stay stagnant.
ROBERT SPENCER: Number two, as David points out, while we think it's very important to anchor in a set of quantitative tools, we also recognize that models are not infallible. They can be vulnerable at certain points in the market — macro inflection points or exogenous events. And so for that reason, we think it's important to leverage the insights of our team to help refine what the quantitative tools are telling us.
And in that way, we can do everything we can to try to make sure we capture what our models might be missing.
DAVID MARSHALL: Three: What we try to do is take fundamental and quant and blend those together. We believe that there's value in quant. We believe that there's value in fundamental. But together there's some synergy that we think is beneficial for overall portfolios.
ROBERT SPENCER: Number four, regime-aware investing. While fundamentals is foundational to our investment process, we also need to be aware of market sentiment or the regime. We want to understand if it's a good time to buy into risk assets or not. And we use our Market Regime Indicator, which measures the level of risk appetite or risk aversion in the marketplace, to do this and accomplish this very key part of our process.
DAVID MARSHALL: Number five: track record. We've been managing portfolio since 1982, and some of our track records are as long as 15 years. We believe this should be evidence that we have been somewhat successful in this space. If you need more information, please visit our website.
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