Asset Allocation ETFs: The Neglected Few
This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article is by Craig Israelsen, Ph.D., creator of the 7Twelve portfolio, consultant to 7Twelve Advisors, LLC and executive-in-residence in the Financial Planning Program at Utah Valley University.
ETFs are predominately a single asset-class product. This makes sense because ETFs are designed to track an index, and virtually all popular indexes are focused on a single asset class.
Among a total of 2,451 ETFs, there were 71 that could be categorized as multi-asset-class portfolios as of Dec. 31, 2020. Multi-asset categories as defined by Morningstar include allocation 15-30% equity; allocation 30-50% equity; Allocation 50-70% equity; Allocation 70-85% equity; Allocation 85%+ equity; Balanced, Multi-alternative, Tactical Allocation and World Allocation.
This little clutch of 71 asset allocation ETFs represents just 2.9% of all ETFs and collectively hold just under $13 billion in assets. The total asset base in all 2,451 ETFs was $5.5 trillion as of Dec, 31, 2020. Thus, asset allocation ETFs represents a meager 0.24% of all ETF assets.
Think of it this way: the Vanguard STAR mutual fund (an asset allocation fund comprising nine other Vanguard funds) had total assets of $27 billion at year-end 2020—or roughly double the combined total of all 71 asset allocation ETFs. Very simply, asset allocation ETFs have not really caught on. But that doesn’t mean there aren’t some good ones.
As shown in Table 1, iShares has five ETFs in the top 20 (ranked by assets among ETFs with at least a three-year history as of Dec. 31, 2020).
The iShares Core Growth Allocation ETF (AOR) leads the pack, with $1.6 billion; followed by the iShares Core Moderate Allocation ETF (AOM), the iShares Core Aggressive Allocation ETF (AOA) and the iShares Core Conservative Allocation ETF (AOK). These four iShares ETFs possess nearly 40% of the total assets among all 71 asset allocation ETFs.
Table 1. 20 Largest Multi-Asset ETFs Performance & Assets
Only funds with a 3-year history as of 12/31/2020
| Symbol | 2020 Return | 3-Year Average Return | 5-Year Average Return | 10-Year Average | Expense Ratio | Assets ($millions) | % of Total Assets | % Cumulative Assets |
Listed by Fund Assets – High to Low | Return | ||||||||
iShares Core Growth Allocation ETF | AOR | 11.6 | 7.72 | 9.09 | 7.8 | 0.25 | 1,601 | 12.30% | 12.30% |
iShares Core Moderate Allocation ETF | AOM | 10.1 | 6.92 | 7.61 | 6.18 | 0.25 | 1,469 | 11.30% | 23.60% |
iShares Core Aggressive Allocation ETF | AOA | 12.85 | 8.44 | 10.5 | 9.12 | 0.25 | 1,184 | 9.10% | 32.80% |
iShares Core Conservative Allocation ETF | AOK | 9.36 | 6.51 | 6.85 | 5.42 | 0.25 | 843 | 6.50% | 39.30% |
IQ Hedge Multi-Strategy Tracker ETF | QAI | 5.56 | 3.52 | 3.49 | 2.7 | 0.78 | 804 | 6.20% | 45.40% |
Invesco CEF Income Composite ETF | PCEF | 4.66 | 5.79 | 9.05 | 6.84 | 2.34 | 796 | 6.10% | 51.60% |
Multi-Asset Diversified Income ETF | MDIV | -14.41 | -1.53 | 2.31 | -- | 0.73 | 462 | 3.60% | 55.10% |
iShares Morningstar Multi-Asset Inc ETF | IYLD | -1.25 | 2.91 | 5.82 | -- | 0.6 | 270 | 2.10% | 57.20% |
Amplify High Income ETF | YYY | -1.2 | 2.69 | 7.35 | -- | 2.17 | 265 | 2.00% | 59.30% |
SPDR SSgA Global Allocation ETF | GAL | 9.03 | 6.45 | 8.07 | -- | 0.35 | 259 | 2.00% | 61.20% |
Principal Active Income ETF | YLD | 2.26 | 4.01 | 7.21 | -- | 0.49 | 232 | 1.80% | 63.00% |
SPDR SSgA Income Allocation ETF | INKM | 3.02 | 4.56 | 6.74 | -- | 0.5 | 127 | 1.00% | 64.00% |
Invesco Zacks Multi-Asset Income ETF | CVY | -10.55 | 0.26 | 6.23 | 4.93 | 0.94 | 121 | 0.90% | 65.00% |
ClearShares OCIO ETF | OCIO | 11.47 | 6.85 | -- | -- | 0.62 | 119 | 0.90% | 65.90% |
First Trust Strategic Income ETF | FDIV | -2.81 | 2.49 | 5.07 | -- | 0.87 | 77 | 0.60% | 66.50% |
Anfield Capital Diversified Alts ETF | DALT | -2.81 | 1.72 | -- | -- | 3.83 | 67 | 0.50% | 67.50% |
Cambria Global Momentum ETF | GMOM | 2.56 | 0.37 | 4.93 | -- | 0.93 | 60 | 0.50% | 67.90% |
SPDR SSgA Multi-Asset Real Return ETF | RLY | -0.87 | 0.53 | 4.65 | -- | 0.5 | 57 | 0.40% | 68.40% |
FormulaFolios Tactical Growth ETF | FFTG | 5.81 | 5.25 | -- | -- | 1.12 | 56 | 0.40% | 68.80% |
IQ Real Return ETF | CPI | -1.43 | 1.27 | 1.71 | 1.29 | 0.42 | 52 | 0.40% | 69.20% |
Four of the five iShares ETFs have a 10-year track record as of Dec. 31, 2020, and their historical returns are impressive. For instance, the iShares Core Aggressive Allocation ETF (AOA), with its 80% equity/20% fixed income allocation (shown in Table 2), produced a 10-year average annualized return of 9.12% and a dandy return of 12.85% in 2020.
Clearly, asset allocation mutual funds dwarf (by an order of magnitude) the assets held in asset allocation ETFs. This isn’t surprising inasmuch as ETFs have not broken the 401(k) barrier where asset allocation mutual funds (and target date mutual funds) are a popular one-stop solution.
Nevertheless, asset allocation ETFs may be an ideal solution for investors with limited investing budgets. With no investment minimum, the only barrier to entry is simply the market price per share of the ETF. In the case of AOA, it was around $66 in early February 2021. AOR was around $53 per share.
Single-ticker global asset allocation for less than $100—that idea may catch on.
Table 2. 20 Largest Multi-Asset ETFs Asset Allocation
Only funds with a 3-year history as of 12/31/2020
| Symbol | 2020 Return | % Allocation US Stocks | % Allocation Non-US Stocks | % Allocation US Bonds | % Allocation Non-US Bonds | % Allocation Cash |
| |||||||
iShares Core Growth Allocation ETF | AOR | 11.6 | 33.99 | 27.9 | 22.99 | 10.29 | 4.42 |
iShares Core Moderate Allocation ETF | AOM | 10.1 | 22.08 | 18.12 | 36.48 | 15.57 | 7.14 |
iShares Core Aggressive Allocation ETF | AOA | 12.85 | 43.9 | 36.04 | 12.08 | 5.15 | 2.59 |
iShares Core Conservative Allocation ETF | AOK | 9.36 | 16.57 | 13.6 | 42.57 | 18.16 | 8.38 |
IQ Hedge Multi-Strategy Tracker ETF | QAI | 5.56 | 5.45 | 17.12 | 40.35 | 13.34 | 15.28 |
Invesco CEF Income Composite ETF | PCEF | 4.66 | 24.9 | 7.5 | 46.67 | 18.92 | -7.91 |
Multi-Asset Diversified Income ETF | MDIV | -14.41 | 59.86 | 0.51 | 20.76 | 1.52 | -2.57 |
iShares Morningstar Multi-Asset Inc ETF | IYLD | -1.25 | 5.81 | 21.33 | 45.27 | 12.68 | 0.77 |
Amplify High Income ETF | YYY | -1.2 | 14.55 | 3.99 | 51.6 | 27.66 | -0.6 |
SPDR SSgA Global Allocation ETF | GAL | 9.03 | 34.56 | 31.49 | 20.61 | 3.26 | 7.26 |
Principal Active Income ETF | YLD | 2.26 | 20 | 1.37 | 63.78 | 1.89 | 0.99 |
SPDR SSgA Income Allocation ETF | INKM | 3.02 | 25.66 | 12.58 | 33.48 | 16.2 | 1.55 |
Invesco Zacks Multi-Asset Income ETF | CVY | -10.55 | 69.83 | 12.29 | 5.82 | 2.83 | 0.25 |
ClearShares OCIO ETF | OCIO | 11.47 | 39.4 | 22.92 | 28.29 | 2.86 | 5.17 |
First Trust Strategic Income ETF | FDIV | -2.81 | 35.14 | 3.55 | 27.85 | 21.34 | 3.18 |
Anfield Capital Diversified Alts ETF | DALT | -2.81 | 48.51 | 16.31 | 9.75 | 6.57 | 4.28 |
Cambria Global Momentum ETF | GMOM | 2.56 | 35.1 | 37.83 | 9.04 | 4.13 | 6.95 |
SPDR SSgA Multi-Asset Real Return ETF | RLY | -0.87 | 24.21 | 30.74 | 17.71 | 7.46 | 12.54 |
FormulaFolios Tactical Growth ETF | FFTG | 5.81 | 35.48 | 46.69 | 3.15 | 0 | 6.4 |
IQ Real Return ETF | CPI | -1.43 | 6.77 | 0.04 | 42.05 | 6.25 | 42.62 |
Contact Craig Israelsen at craig@7TwelvePortfolio.com
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