He likes their relatively low management fees, their liquidity and the fact they are easily understood by clients.
Through active rebalancing of his ETF portfolios, Mench says he has been able to provide clients with 90% to 100% of the S&P 500's upside, and limit the downside to 70% or less. In a recent move, for example, the firm increased its large-cap investments from 56% to 64%, and reduced its bond investments from 40% to 32%.
Earlier in the year, when "everything was under attack," Mench says he started to move assets to the sideline. By the third quarter, about 15% to 25% of client holdings were in cash accounts.
"In our analysis of ETFs, there just wasn't anything out there fundamentally undervalued and acting well relative to other things that were available," he says.
Going forward, Mench plans to make more use of 1X inverse ETFs.