Sage takes a macro, top-down approach, which influences its market segment allocation. With fixed income, that allocation is shaped by overall portfolio duration and yield curve positioning, coupled with core and non-core sector allocation exposure. With equities, big picture decisions are driven by market cap, style and region, along with core and non-core sector allocation.
When it comes to employing ETFs, the firm’s philosophy is “less is more.”
“Our job is to get the job done with the fewest brush strokes possible with the highest degree of positive outcome for the lowest cost possible,” Smith explains. “Instead of having a portfolio with 15 to 20 different ETFs, we can probably get it done in 10 or less. We often find that simple solutions are the ones that are most repeatable and get you the best results regardless of market environment, and they are the most affordable regarding cost.”
Sage charges 30 to 40 basis points for its ETF-based strategies, depending on whether they’re delivered via an investment platform or used in separately managed accounts. (The platforms and individual advisors layer their respective fees on top of the base price.)
Roughly three-quarters of Sage’s business is institutional separate accounts using individual securities, and the remainder is ETFs in the neighborhood of $2.7 billion, Smith says. Of that ETF business, 40% to 50% of it is institutionally focused, and the rest is retail platform-focused.
Sage’s strategies are on 20 investment platforms. “Some of them have one strategy; some have all of our strategies,” Smith says.
Those platforms include the likes of new customers Commonwealth Financial and Primerica, along with older customers such as UBS, Morgan Stanley, Cetera, RBC and Raymond James.
Regarding performance of its tactical ETF strategies, the operative phrase is “risk-adjusted” returns comparable to their benchmarks. As of June 30, perhaps the best all-around performer was the All Cap Equity Plus strategy, where the five-year annualized 7.32% gross return topped its benchmark by nine basis points (though it trailed by 31 basis points on a net basis), with a slightly lower standard deviation and a slightly higher Sharpe ratio. The up-market capture was 93.13 and the down-market capture was 92.07.
Sage uses mostly index-based ETFs, and spreads its bets among the leading ETF providers. “We work with State Street, iShares, Vanguard, PowerShares,” Smith says. “But I don’t care which provider it is on a given day when I have to make the best choice as a fiduciary for my client.”
To Smith’s thinking, keeping it simple helps Sage differentiate itself in the ever-growing ETF strategist marketplace. “We’re not glitzy; we’re about as Plain Jane as it gets,” he states. “But I don’t think people invest money for sexiness. They do it for consistency and outcomes.