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VP, Client Services & Implementation
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Senior Client Consultant

Blending Managers with Short History

Nov 3, 2011 Stephen Berei
I’ve had this question come up a lot lately and I’d like to address it here. Some managers just don’t have a lot of history. This can cause a blended portfolio utilizing these managers to have a short history as well. When a blend is created in StyleADVISOR it will default to the common period; you do have the option to set the begin date prior to the common period, but that is just avoiding the issue rather than providing a solution.
 
What is the Solution?
What we can do is add a proxy, such as the primary index, category average or whatever you feel fit for that fund, ETF, etc. to the blend. Below is a screenshot of the Edit Blend box in StyleADVISOR where I am looking to create a 50/50 blend. Below that I’ll explain what we’re doing:

The Global X Aluminum ETF has a Begin Date of Feb 1, 2011. If we were to use the common period for this blend, the Begin Date would only allow us to run back 8 months. However, I’ve added an index into the blend, the S&P GSCI Aluminum which we have data back until Jan 1, 1991. What I’ve done is inserted a 2nd column to reflect the ETF Start Date. So, we have set 50% to Fidelity Magellan and 50% to the S&P GSCI Aluminum from Jan 1, 1991 until Jan 31, 2011. Then set 50% to Fidelity Magellan and 50% to the Global ETF from Feb 1, 2011 to Sep 30, 2011. If you look at the "Date range" within the green oval, you can see we have a full date range from Jan 1, 1991 until Sep 30, 2011 for our blend.
 
Now, this is a simple example, but the same logic can be used with several different products included in the portfolio.
 

What type of managers would this affect?

This could essentially affect any type of product. If the product has a short history, we can set a proxy for it to extend the history. Mostly, you will see this with ETFs, but I’ve seen Offshore Funds come into play a lot as well.
 
For help videos with blends you can go to our website styleadvisor.com and Client Resources...Help Videos...Quick Tip Videos. Below are links to our videos.
 

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