Multi-family office Sandaire uses ETFs for strategic asset allocation

Oliver Smith, Sandaire

Joining the panel on trends and thematic investing in ETFs at this year’s etfLIVE event is Oliver Smith, investment director at multi-family office Sandaire.

Smith (pictured) recently joined the firm having been head of ETF portfolios at IG. Sandaire has GBP2.3 billion in assets, managed for around 20 clients, ranging from single individuals to family groups of up to 100. It was founded in 1998 by a founding family who had sold an insurance business and wanted to preserve wealth through the generations.

Investment is in multi-strategies from conservative up to all equity mandates.

“I am a hands-on portfolio manager for a number of accounts,” Smith says. “Day to day I make tactical asset management decisions and also have a geographical focus on Europe.”

Every client’s strategic asset allocation is built using an ETF framework, with typically a third of a client’s portfolio in passives.

“In markets that we think are pretty efficient, we take the passive route and where inefficiencies lie, we go active,” Smith says. “We are also currently interested in factor exposures and having a lot of debate over when to rotate from growth to value investing.”

During the recent market volatility, Smith has observed that the cost of trading ETFs has increased with bid/ask spreads widening, particularly in fixed income.

“Where appropriate, we have added to equities slowly as markets have fallen but we are still underweight in aggregate. We are slowly chipping away to reduce this, but given the unique circumstances of this correction, we want to keep our powder dry.”

Thematic ETFs have not been a large part of Smith’s investment portfolios since he joined the firm but they do use ETFs for real estate exposure and gold and there has been a thematic exposure to minimum volatility ongoing for the past 15 months which works extremely well in short sharp sell-offs, but will come under pressure in a period of sustained selling.

The year to date return from the minimum volatility ETF is a fall of 10 per cent against 16 per cent in the market which is, as Smith says, attractive outperformance.

Smith reports that some clients have a 100 per cent ESG mandate and these are entirely invested in ETFs.

“There is a much broader range than there was a year ago,” he says. “Several firms are competing in that space. There still isn’t quite the amount of breadth and depth as you get in normal ETFs but 98per cent of asset classes are covered.”

The falling oil price has had an unexpected effect on ESG mandates year to date giving them outperformance over portfolios that include oil.

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