101 Concepts for the Level I Exam
Essential Concept 91: ETFs in Portfolio Management
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Primary ETF strategies include:
- Portfolio efficiency: The use of ETFs to better manage a portfolio for efficiency or operational purposes. The applications include:
- transacting cash flows for benchmark exposure
- rebalancing to target asset class or risk factor weights
- filling exposure gaps in portfolio holdings of other strategies and funds
- temporarily holding during transitions of strategies or managers
- Asset class exposure management: The use of ETFs to achieve or maintain core exposure to key asset classes, market segments, or investment themes on a strategic, tactical, or dynamic basis.
- Active and factor investing: The use of ETFs to target specific active or factor exposures on the basis of an investment view or risk management need.
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