Hortz: What are your parameters around rotating across innovation opportunities? What are the triggers you respond to?
Arthur: We use a combination of both quantitative metrics (P/E to growth, PE, P/B, P/S) as well as over 250 macro and micro quantitative and qualitative indicators.
Hortz: What sources of innovation research will you be using as part of your due diligence and investment process? What type of analysis do you feel is most important?
Arthur: We currently take into consideration industry research from a variety of sources and will continue to do so. Some external firms are already providing research which covers areas outside of the traditional investment framework and more closely aligns with the goal of the innovation strategy. The biggest departure in the investment process from our more traditional investment strategies is likely to be a shift in reliance from quantitative metrics to more qualitative ones, like observations around consumer behavior and technological advances, as opposed to, say, the price to book ratio for a given industry.
Hortz: How are you going to implement your strategy? What specific investment vehicles will you use?
Arthur: We use ETFs only. Currently we are running the strategy in client separately managed accounts and the strategy is available for our advisors on Envestnet. We are exploring making the strategy available in an ETF or Mutual Fund wrapper.
Hortz: How is your experience in working with exclusively ETF portfolios help or inform you on running and managing this new investment strategy?
Arthur: We have used ETFs exclusively in our investment strategies since our inception in 2002. As a result, we are very familiar with the intricacies involved in identifying the appropriate ETFs to gain the exposure we want. We are comfortable looking “under the covers” to see what exposure a given ETF is providing and to ensure we are gaining the exact exposure we want before choosing an ETF. We also have an extensive research platform for ETFs as part of our ongoing due diligence.
At Main Management, we believe investors should get to keep more of their investment returns. By combining the investment insights of experienced industry professionals with smart implementation vehicles like ETFs, we focus on reducing the drag which fees, taxes, and investor behavior have on returns. We are committed to delivering liquid, transparent, tax aware and cost-effective investment solutions to our clients.
Hortz: Any last thoughts or recommendations for advisors on how to allocate innovation investing into client portfolios?
Arthur: Using ETFs rather than single stocks makes it easier to gain exposure to a variety of underlying names involved in a given theme or sector. Look for ETFs that aim to capture themes that an advisor feels are disruptive technologies and present a significant market opportunity with catalysts for long-term adoption. Alternatively, send them our way and we will take the guesswork out of it for them with our Thematic Innovation Strategy.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor magazine).