NorthCoast Asset Management’s ETF retirement portfolios have picked up where they left off in 2016. Top U.S. holdings have reached new heights in 2017 and international holdings have been standout performers. Amid the gains, NorthCoast added new managed-ETF portfolios that focus on foreign countries’ equities.

Here are some first-quarter highlights:

NorthCoast upped its stakes in iShares Core S&P 500 ETF ( IVV ) in Q1. The ETF hit an all-time high earlier this month. “Our models were generally bullish on equity markets, which led to our increased position,” said Patrick Jamin, chief investment officer for NorthCoast. “We saw higher macro and sentiment signals. The labor markets have performed remarkably well with significant payroll increases in January and February. PMI (Purchasing Managers’ Index) rose in February to its highest level since 2014.”

Shares of IVV rose 6% in Q1.

Small caps lagged large caps during the quarter. Jamin lightened slightly NorthCoast’s position in iShares Core S&P Small-Cap ETF ( IJR ), but he says it could become a value play. “There is a higher level of debt for small-cap companies, which can be a drag in a rising interest-rate environment,” he said. “While we do see weaker technical signals, we are seeing both stronger sentiment and valuation signals. These developments could make for an attractive entry point.”

IShares MBS ETF ( MBB ) has bounced back since fading from late February into early March. “We held on to the position and trimmed it after it recovered,” Jamin said. “We have since started to invest the proceeds in other high-yield ETFs such as iShares iBoxx $ High Yield Corporate Bond ETF ( HYG ).”

NorthCoast’s foreign investments have been quick out of the gates. IShares Core MSCI Emerging Markets ETF ( IEMG ) and iShares MSCI Japan ETF (EWJ) surged 13% and 6% respectively in Q1. IEMG’s top holdings include Samsung Electronics, Tencent Holding (TCEHY), Taiwan Semiconductor (TSM) and Alibaba (BABA)

Jamin bought iShares MSCI Pacific ex Japan ETF (EPP) in late March. “Our economic outlook in the Asia Pacific area is positive,” he said. “Australia’s economy is benefiting from a record high trade balance largely due to rising commodity prices and reduced tariffs in China. Hong Kong’s economy also experienced some strong performance with fourth-quarter GDP growing by 1.2%. A recovery in housing markets and exports is lifting overall activity and we expect this trend to continue to play out in 2017.”

Eurozone equities picked up steam in Q1. IShares MSCI Eurozone ETF (EZU) was the top holding in three of NorthCoast’s ETF retirement portfolios as the quarter came to a close. “We saw rising margins for the underlying companies and muted political anxiety,” Jamin said. “The European Central Bank has also indicated its intentions to remain accommodative for 2017 and not follow in the steps of the Federal Reserve in tightening monetary policy.”

Shares of EZU rose 8% in Q1.

The resilient performance of foreign ETFs came on the heels of a recent NorthCoast product launch. In January, the firm added four additional managed account offerings concentrated in international ETFs.

The Global Select, International Select, International Select Hedged and Emerging Market Select portfolios each hold five to 12 ETFs. The latter three invest exclusively in foreign ETFs. “International equities have been a long-standing research focus of NorthCoast,” said Dan Kraninger, president and chief executive officer of NorthCoast. “With the recent underperformance in international markets over the last few years, we believe now is a great time to offer these solutions to investors.”


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