Data from the Advisor Perspectives (AP) Universe shows trends in high- and utra-high net worth investors whose assets are managed by Registered Investment Advisors (RIAs). This study updates a previous study and looks at index and ETF usage in the AP universe during the third quarter of 2007. The methodology used in this study differs from the previous study in that this study uses data from Index Universe for its classification of index funds and ETFs.
Significant findings from this study include the following:
- Holdings of ETFs are significantly more than of index funds, with a split of 65% to 35%. This difference narrowed slightly from the beginning of Q3, when the split was 67.4%/32.6%. (See Table 1)
- Index funds and ETFs together represent 29% of mutual fund assets in the AP universe, up from 27% as of June 30.
- Index funds and ETFs together represent 4.6% of total assets in marketable securities, up from 3.85% as of June 30.
- Holdings of broad-based index funds and ETFs are relatively small. Index funds and ETFs tied to the S&P 500 represent 17.27% of all index funds and ETFs (down from 18.43% as of June 30). Index funds and ETFs tied to the MSCI EFA represent 17.52% of index and ETF assets (down from 18.0% as of June 30). Funds tied to these two indices represent the largest segment of index and ETF holdings, and together represent 1.6% of marketable securities in the AP universe as of September 30.
- Index funds and ETFs based on fundamentally weighted indices represent a small portion of index and ETF holdings:
|
6/30/07 |
9/30/07 |
Change |
RAFI indices |
2.0% |
.8% |
-1.2% |
Wisdom Tree Funds |
.8% |
.7% |
-.1% |
The RAFI indices represent index funds and ETFs that are officially licensed by Research Associates to use the RA methodology. We also show the Wisdom Tree Funds because these funds employ similar methodologies.
- As noted in a recent study, holdings in sector-based ETFs and index funds (including those based on real estate indices) are relatively small, representing 3.97% of index fund and ETF assets, or approximately .2% of total marketable securities, as of September 30. (Note: this study differs from the previous study in that this study includes both index funds and ETFs, whereas the previous study examined only ETFs.)
- The top three index fund and ETF holdings in the AP universe parallel those in the market. In the AP Universe, the leading funds are the EFA, SPY, and the Vanguard S&P 500 Index Fund, in that order. However, numbers four, five and six reveal differences. In the AP universe, these are EWJ (iShares Japan), EEM (iShares Emerging Markets), and GLD (StreetTracks Gold). In the broader market these three funds are ranked below number 10, revealing the fact that advisors rely more heavily on ETFs to gain exposure to segments of the non-US markets, as well as to commodities such as gold.
Overall, this study reaffirms earlier findings and shows, most importantly, that HNW/UHNW investors hold very little broad-based market indices. Moreover, there were no significant shifts in allocations to funds based on specific indices or groups of indices. Within index funds and ETFs, investors maintained their asset allocations despite the high market volatility during the summer of 2007.
The AP Universe consists of approximately $50 billion of assets held in approximately 50,000 individual accounts. The average account size in the AP Universe is $901,000. Data from the AP Universe is divided into three tiers based on account size. In the tier containing the largest accounts, the average account size is $3.5 million, and assets in this tier represent 94% of the assets in the AP Universe. Investors hold multiple accounts, and HNW and UHNW investors typically hold 10-20 or more accounts. For this reason, the AP Universe reveals trends predominantly in the UHNW segment.
Data from the study is shown below.
Table 1 - ETF versus Index Fund Usage
(Percentages shown are based on index funds and ETFs in the AP Universe.)
|
6/30/07 |
9/30/07 |
ETFs |
67.4% |
65.0% |
Index Funds |
32.6% |
35.0% |
Table 2 - Usage by Asset Class
(Percentages shown are based on index funds and ETFs in the AP Universe.)
Asset Class |
6/30/2007 |
9/30/2007 |
Change |
Bonds - Corporate |
0.10% |
0.09% |
-0.01% |
Bonds - International |
0.91% |
1.08% |
0.17% |
Bonds - Long |
0.17% |
0.02% |
-0.15% |
Bonds - Mid |
1.52% |
1.62% |
0.10% |
Bonds - Municipal |
0.02% |
0.02% |
0.00% |
Bonds - Short |
1.76% |
2.02% |
0.26% |
Bonds - Total Market |
1.70% |
1.55% |
-0.15% |
Commodities - General |
2.39% |
2.85% |
0.46% |
Commodities - Precious Metals |
2.98% |
3.04% |
0.06% |
Currencies |
0.29% |
0.83% |
0.54% |
Dividend |
0.95% |
0.82% |
-0.13% |
International - Country - Developed |
5.14% |
4.17% |
-0.97% |
International - Country - Emerging |
0.81% |
1.28% |
0.47% |
International - Developed |
21.44% |
20.88% |
-0.56% |
International - Emerging |
5.46% |
5.74% |
0.28% |
International - Sectors |
0.36% |
0.67% |
0.31% |
Large Cap |
21.33% |
18.87% |
-2.46% |
Large Cap Growth |
2.43% |
2.70% |
0.27% |
Large Cap Value |
2.92% |
3.00% |
0.08% |
Leveraged |
0.54% |
0.27% |
-0.27% |
Micro Cap |
0.01% |
0.02% |
0.01% |
Mid Cap |
2.92% |
2.86% |
-0.06% |
Mid Cap Growth |
0.36% |
0.36% |
0.00% |
Mid Cap Value |
1.43% |
1.33% |
-0.10% |
Real Estate |
1.38% |
1.29% |
-0.09% |
Sector - Basic Materials |
0.16% |
0.17% |
0.01% |
Sector - Consumer Goods |
0.25% |
0.19% |
-0.06% |
Sector - Consumer Services |
0.10% |
0.07% |
-0.03% |
Sector - Energy |
0.74% |
0.70% |
-0.04% |
Sector - Financial |
0.39% |
0.31% |
-0.08% |
Sector - Healthcare |
0.52% |
0.45% |
-0.07% |
Sector - Industrial |
0.16% |
0.12% |
-0.04% |
Sector - Natural Resources |
0.14% |
0.22% |
0.08% |
Sector - Technology |
0.26% |
0.26% |
0.00% |
Sector - Telecommunications |
0.02% |
0.04% |
0.02% |
Sector - Utilities |
0.18% |
0.15% |
-0.03% |
Small Cap |
3.97% |
3.89% |
-0.08% |
Small Cap Growth |
1.89% |
1.62% |
-0.27% |
Small Cap Value |
2.86% |
2.43% |
-0.43% |
Socially Responsible |
0.13% |
0.13% |
0.00% |
Target Date |
0.00% |
0.00% |
0.00% |
Total Market |
3.84% |
4.46% |
0.62% |
(blank) |
5.07% |
7.45% |
2.38% |
Grand Total |
100.00% |
100.00% |
|
Table 3 - Usage by Category
(Percentages shown are based on index funds and ETFs in the AP Universe.)
Category |
6/30/2007 |
9/30/2007 |
Change |
Bear-Market |
0.24% |
0.11% |
-0.13% |
Conservative Allocation |
0.00% |
0.00% |
0.00% |
Diversified Emerging Mkts |
5.17% |
5.44% |
0.27% |
Diversified Pacific/Asia |
0.00% |
0.00% |
0.00% |
Europe Stock |
1.58% |
1.57% |
-0.01% |
Foreign Large Blend |
16.59% |
16.17% |
-0.42% |
Foreign Large Growth |
0.03% |
0.06% |
0.03% |
Foreign Large Value |
0.92% |
1.13% |
0.21% |
Foreign Small/Mid Growth |
0.01% |
0.17% |
0.16% |
Foreign Small/Mid Value |
0.99% |
1.00% |
0.01% |
High Yield Bond |
0.00% |
0.00% |
0.00% |
Inflation-Protected Bond |
0.33% |
0.38% |
0.05% |
Intermediate Government |
0.21% |
0.18% |
-0.03% |
Intermediate-Term Bond |
2.61% |
2.40% |
-0.21% |
Japan Stock |
5.38% |
4.21% |
-1.17% |
Large Blend |
25.63% |
25.90% |
0.27% |
Large Growth |
3.00% |
3.25% |
0.25% |
Large Value |
5.59% |
4.57% |
-1.02% |
Latin America Stock |
0.39% |
0.60% |
0.21% |
Long Government |
0.47% |
0.40% |
-0.07% |
Long-Short |
2.14% |
2.67% |
0.53% |
Long-Term Bond |
0.13% |
0.12% |
-0.01% |
Mid-Cap Blend |
3.21% |
3.12% |
-0.09% |
Mid-Cap Growth |
0.36% |
0.36% |
0.00% |
Mid-Cap Value |
1.46% |
1.34% |
-0.12% |
Moderate Allocation |
0.17% |
0.14% |
-0.03% |
Muni National Short |
0.02% |
0.02% |
0.00% |
Pacific/Asia ex-Japan Stk |
2.04% |
2.22% |
0.18% |
Short Government |
0.28% |
0.77% |
0.49% |
Short-Term Bond |
0.92% |
0.79% |
-0.13% |
Small Blend |
4.02% |
3.94% |
-0.08% |
Small Growth |
1.89% |
1.62% |
-0.27% |
Small Value |
2.83% |
2.41% |
-0.42% |
Specialty-Communications |
0.02% |
0.04% |
0.02% |
Specialty-Financial |
0.40% |
0.31% |
-0.09% |
Specialty-Health |
0.53% |
0.47% |
-0.06% |
Specialty-Natural Res |
3.54% |
4.23% |
0.69% |
Specialty-Precious Metals |
2.99% |
3.04% |
0.05% |
Specialty-Real Estate |
1.61% |
2.10% |
0.49% |
Specialty-Technology |
0.28% |
0.27% |
-0.01% |
Specialty-Utilities |
0.23% |
0.19% |
-0.04% |
Target-Date 2000-2014 |
0.00% |
0.00% |
0.00% |
Target-Date 2015-2029 |
0.00% |
0.00% |
0.00% |
Target-Date 2030+ |
0.00% |
0.00% |
0.00% |
Ultrashort Bond |
0.35% |
0.29% |
-0.06% |
World Allocation |
0.01% |
0.01% |
0.00% |
World Bond |
1.21% |
1.91% |
0.70% |
World Stock |
0.23% |
0.05% |
-0.18% |
(blank) |
0.00% |
0.03% |
0.03% |
Grand Total |
100.00% |
100.00% |
|
Table 4 – Usage by Index
(Percentages shown are based on index funds and ETFs in the AP Universe.)
Index |
6/30/07 |
9/30/07 |
Change |
DJ Financial |
0.38% |
0.30% |
-0.08% |
DJ Healthcare |
0.35% |
0.29% |
-0.06% |
DJ Moderate Port |
0.01% |
0.01% |
0.00% |
DJ Telecom |
0.01% |
0.01% |
0.00% |
DJ Utility |
0.14% |
0.11% |
-0.03% |
DJ Wil 4500 |
0.05% |
0.05% |
0.00% |
DJ Wilshire REIT |
1.25% |
1.10% |
-0.15% |
GoldmanSachsNatRes |
0.58% |
0.55% |
-0.03% |
LB 1-5 Yr Gov/Cor |
0.82% |
1.32% |
0.50% |
LB 1-5 Yr Govt |
1.25% |
1.60% |
0.35% |
LB 5-10 Yr Gov/Cor |
0.38% |
0.34% |
-0.04% |
LB Aggregate |
2.21% |
2.03% |
-0.18% |
LB Credit |
0.10% |
0.09% |
-0.01% |
LB Government |
0.63% |
0.78% |
0.15% |
LB LT Government |
0.17% |
0.01% |
-0.16% |
LB LT Govt/Credit |
0.00% |
0.00% |
0.00% |
LB Muni 3yr(2-4) |
0.02% |
0.02% |
0.00% |
Lehman+Brothers+1-3+Yr+Govt |
0.00% |
0.00% |
0.00% |
Lehman+Brothers+Aggregate+Bond |
0.00% |
0.00% |
0.00% |
MSCI AC FEexJpFrID |
0.36% |
0.36% |
0.00% |
MSCI AC Wld FreeID |
0.01% |
0.00% |
0.00% |
MSCI EAFE NDTR_D |
18.00% |
17.52% |
-0.48% |
MSCI Eas NdD |
0.03% |
0.03% |
0.00% |
MSCI EMF ID |
4.79% |
5.08% |
0.29% |
MSCI EMF LatinAmID |
0.33% |
0.52% |
0.19% |
MSCI Eur NdD |
1.39% |
1.39% |
0.00% |
MSCI JAPAN Ndtr_D |
4.93% |
3.84% |
-1.09% |
MSCI Pac NdD |
0.10% |
0.06% |
-0.03% |
MSCI Pc xJND |
1.04% |
1.04% |
0.00% |
MSCI Wd x USN |
0.00% |
0.00% |
0.00% |
MSCI Wd xUSN |
0.02% |
0.02% |
0.00% |
MSCI Wld Met/MinID |
0.01% |
0.01% |
0.00% |
MSCI WORLD NDTR_D |
0.23% |
0.04% |
-0.19% |
MSCI Wrld Ndtr_D |
0.01% |
0.01% |
0.00% |
MSCI+EAFE+IL |
0.00% |
0.00% |
0.00% |
Mstar Large Core |
0.34% |
0.26% |
-0.08% |
Mstar Large Growth |
0.04% |
0.07% |
0.03% |
Mstar Large Value |
0.01% |
0.01% |
0.00% |
Mstar Mid Core |
0.66% |
0.74% |
0.08% |
Mstar Mid Growth |
0.02% |
0.02% |
0.00% |
Mstar Mid Value |
0.15% |
0.16% |
0.01% |
Mstar Small Core |
0.87% |
0.84% |
-0.02% |
Mstar Small Growth |
0.01% |
0.01% |
0.00% |
Mstar Small Value |
0.22% |
0.16% |
-0.07% |
Mstar Srvs SuprTR |
0.00% |
0.00% |
0.00% |
Mstar US Mkt TR |
0.00% |
0.00% |
0.00% |
NASDAQ 100 |
0.54% |
0.85% |
0.31% |
NYSE Tech 100 |
0.25% |
0.25% |
0.00% |
Other |
0.00% |
0.01% |
0.01% |
Russ 1000 |
4.62% |
5.16% |
0.54% |
Russ 1000 Growth |
2.22% |
2.13% |
-0.09% |
Russ 1000 Value |
4.67% |
5.00% |
0.33% |
Russ 2000 |
3.16% |
3.03% |
-0.13% |
Russ 2000 Growth |
2.34% |
2.03% |
-0.31% |
Russ 2000 Value |
1.54% |
1.31% |
-0.23% |
Russ Midcap Growth |
0.31% |
0.29% |
-0.02% |
Russ Midcap Value |
0.32% |
0.29% |
-0.03% |
Russell+1000 |
0.00% |
0.00% |
0.00% |
Russell+2000 |
0.58% |
0.56% |
-0.02% |
S&P 500 |
18.43% |
17.27% |
-1.15% |
S&P Midcap 400 |
4.19% |
4.36% |
0.17% |
Standard&Poor's+500 |
0.07% |
0.06% |
-0.01% |
Standard&Poor's+Midcap+400 |
0.00% |
0.00% |
0.00% |
(blank) |
14.85% |
16.63% |
1.77% |
Grand Total |
100.00% |
100.00% |
0.00% |
Table 5 – Top 25 Index Funds and ETFs in the AP Universe (ranked by AUM)
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