The asset-allocator databases run by Morningstar, Informa and BlackRock don't include registered funds like State Street's or broker-dealers, which have rolled out their own versions of the products. San Francisco-based Wells Fargo & Co., the third- largest U.S. broker-dealer by client assets, manages about $7 billion in three ETF-based asset-allocation strategies, Ian MacEachern, the firm's head of advisory products, said in an interview.
Selena Morris, a spokeswoman for Charlotte, North Carolina- based Bank of America Corp.'s Merrill Lynch unit, and James Wiggins, a spokesman for New York's Morgan Stanley, declined to provide figures for similar products offered by the two firms.
Windhaven's Cucchiaro said he's as much an active investor as Miller, tinkering regularly with the lineup of ETFs in his portfolios and their weightings. He said his approach makes more sense than picking individual stocks and bonds.
"Our research shows there's a lot more inefficiency between asset classes than within markets, so why not spend your energy there?" said Cucchiaro, who founded Windhaven, previously known as Windward Investment Management, in 1994.
Active investors typically look for securities whose real value hasn't been recognized by other investors for lack of information. They refer to any deviation between a security's price and its intrinsic value as an inefficiency in the market.
Windhaven's three products aim to capture differing levels of risk. The largest has $2.9 billion in about 18 ETFs that include those holding domestic and non-U.S. stocks, corporate bonds, gold, real estate and Treasuries. It returned an average of 5.7 percent annually, after fees, over the five years ended Dec. 31, compared with 2.3 percent for the S&P 500 Index.
Miller, who beat the S&P for a record 15 straight years through 2005, topped the index in just one calendar year since: 2009. Value Trust lost an annual 8.1 percent in the last five years. Assets fell to $3.65 billion as of June 6 from a peak of $21 billion in April 2007.
ETFs have helped fuel the larger trend toward index-based investments in the past decade. Together, index mutual funds and ETFs attracted $559 billion in the U.S. in the three years ended Dec. 31, compared with $244 billion for actively run funds, according to the ICI. ETFs accounted for $412 billion of the net deposits.
The new products demonstrate that using ETFs doesn't mean an investor's approach is wholly passive, Martin L. Flanagan, chief executive officer of Atlanta-based Invesco Ltd., said in a telephone interview.
"When people think of ETFs, they really start by thinking of them as modern-day index funds," Flanagan said. "But what ETFs are and what they can do is really not yet fully understood."