Flush with new cash, Horizon Investments is even better positioned to provide first-rate advice to investors on the best ETFs and funds in the market.
It just got a fresh infusion of funds from private equity firm Altamont Capital Partners. In 2021, Palo Alto, Calif.-based Altamont took a controlling position in Horizon Investments. The Charlotte, N.C.-based registered investment advisor has nearly $8 billion in assets as its quick growth continues.
"The goal of us doing that transaction is really trying to drive further into being the leader in goals-based investment management, which we do see as the future of the industry," said Horizon's Chief Investment Officer and chair of the investment committee Scott Ladner.
"We've been thinking about doing this for years," he said. The deal "will give us some ability to possibly make acquisitions and grow more aggressively than we would've been able to do by ourselves."
Finding The Best ETFs
Horizon's goals-based investment process helps financial advisors and their clients to adapt to changes in their investment goals and risk profile throughout their lives. Its Gain Protect Spend framework helps to select the best ETFs and funds to meet a client's objectives.
Ladner, who's worked in financial risk management since 1998 and who started at Horizon in 2010, shared with IBD his picks for the best ETFs now.
"The requests over the last six months have been all about inflation, and 'what do I do about inflation and low bond yields,' " he noted.
Looking For Value In China
One of his best fund picks is Xtrackers Harvest CSI 300 China. "It's the first time that we actually liked China or emerging markets in about a year," he said. "We view this as more of a tactical play than a strategic position."
He specifically likes that China had an important policy pivot in the last 18 months. It has shifted from growth-at-any-price endpoint to stability-at-any-price. As a result, "We can't really count on China to be the strong countercyclical economic force that they have been for the last 10 years." While in the past, in times of slowing economy, China would step on stimulus gas, "in the last 12 months they have not done that."
Only recently has China started to take some targeted stimulus measures. "But we really think that's just because growth has gotten so bad that it's started to threaten stability," he said. Because of all these factors, the Chinese market now offers reasonable valuations relative to the U.S.
The $3.1 billion fund has more of a value tilt, according to Ladner. Its holdings have a larger proportion of banks and fewer tech stocks than other China ETFs. The fund was down 1.56% last year and has declined 8% this year going into Feb. 2. It charges an annual fee of 0.65%.
Best ETFs: Girding For Volatility
Another fund Ladner likes is First Trust Horizon Managed Volatility Domestic — one of three ETFs Horizon subadvises. The $128 million fund actively targets low volatility. It tends to invest in smaller, value-oriented companies in the large-cap spectrum. Horizon uses an in-house-developed mathematical algorithm to select stocks.
"It's the only one in the market that uses volatility forecasting," explained Ladner. "Rather than using past volatility to make selections in the portfolio, it actually forecasts volatility."
He explained that forecasting volatility especially matters when things are changing quickly.
"We think we're in a market environment where the cycles are increasingly compressed (and) regime shifts happen faster and faster," he said. "So having a volatility forecasting engine inside of this ETF can help catch those turns a little bit more quickly than just relying on the past realized volatility like many other low-vol ETFs do."
Top holdings include McDonald's, PepsiCo, Procter & Gamble, Johnson & Johnson and Coca-Cola. The fund was up 26.03% in 2021 and is down 5.5% this year.
Diving For Income
Ladner's third best ETF recommendation appeals to investors whose asset allocation has a fixed-income portion.
"We're generally proponents of equity and hedged equity over fixed income, but we understand that some portfolios and some allocations have a rule that you have to have some fixed income in there."
SPDR Blackstone Senior Loan invests in senior loans, which have a floating-rate feature and are senior to any unsecured loans that a company might have. The $9.9 billion fund has an SEC yield of 4.09% and, because of its floating-rate characteristics, will adjust with changes in interest rates.
That said, this fund does not come without risks and "can drop in value sharply as it did in March of 2020." Ladner believes, however, that the risk-return of the fund is "very well balanced right now." But he does advise to have active management in place to work with such a fund.
Scott Ladner At A Glance
- Horizon Investments
- Chief Investment Officer
- Ladner thinks rising inflation and looming hikes in short-term interest rates call for ETFs that position portfolios for the shift.
