Broker-dealer LPL Financial has made its foray into the smart beta space with the launch of three internally-manged separately managed accounts (SMAs).
The firm has launched the LPL Market Leaders Core SMA, LPL Market Leaders Income SMA and the LPL Insider Insights SMA.
All three are managed by the LPL Research team, headed by chief investment officer Burt White (pictured), and are available on the firm’s Manager Select and Manager Access Select SMA platforms.
All three of the strategies will follow equal-weighted indices made up of securities selected through a quantitative screening process, which will use a system built by Bloodhound Investment Research, a company LPL acquired in November 2016.
White told Citywire: ‘This is an opportunity for us to think about a value solution that really drives all of the benefits of separately managed accounts and the benefits of a smart beta actively managed strategy done in a way that you can have very low cost.’
He said LPL had decided to run the strategies itself rather than use a third-party manager to keep costs down.
The strategies have an annual management fee of 5 basis points (bps) and require a minimum investment of $50,000.
All three strategies will be rebalanced quarterly. The Market Leaders Income strategy will have an annual turnover of 10% to 30%, while the Market Leaders Core strategy will be 5% to 25% and the Insider Insights strategy 50% to 100%.
The Market Leaders Core strategy will follow an index made up of 50 stocks, filtered down from the 990 in the Russell 1000. The portfolio will have an average market cap of $175.7 billion against the benchmark’s $151.7 billion.
The Market Leaders Income strategy will also hold 50 stocks, filtered from the Russell 1000 Value index, a benchmark it will aim to out-yield by 75 to 125bps.
The Insider Insights strategy will have 47 holdings, made up of stocks with insider buying over the last six months that trade below the average price paid by insiders over the lookback period.
In a separate initiative LPL will partner with American Funds to offer the $88.4 billion Investment Company of America in SMA format on its Manager Select platform in the latter part of August.
It is understood that this will be the first American Funds SMA on the platform, with more to be added in the coming months.