A Mutual Fund Built From ETFs -- AdvisorOne Amerigo Fund (CLSAX; ETFs: EEM, IWP, IWD, QQQQ, EFA, VO, IYT, SPY, VTV, XLP)

Roger Nusbaum (wish list) submits: Gregg Greenberg has an article up about a fund company that uses only ETFs in its funds. Their stock fund (as opposed to stock bond combo) is the AdvisorOne Amerigo Fund (CLSAX). Here are the top ten holdings:

1. iShares MSCI Emerg Mkts (EEM) 14.28%
2. iShares Russell Midcap Growth (IWP) 10.28%
3. iShares Russell 1000 Value (IWD) 10.05%
4. NASDAQ 100 Trust Shares (QQQQ) 7.70%
5. iShares MSCI EAFE (EFA) 7.05%
6. Vanguard Mid Cap VIPERs (VO) 6.29%
7. Consumer Staples Select Sector SPDR (XLP) 5.69%
8. iShares Dow Jones Trannies (IYT) 4.80%
9. SPDRs (SPY) 4.07%
10. Vanguard Value VIPERs (VTV) 3.93%

This might be the first one of these funds that I have looked at that makes an attempt to capture certain effects using sector ETFs. I am also impressed by the willingness to have a lot of foreign exposure.

There are negatives as well. Yeah the fees, but that is not what I mean. Actually the fee is reasonable as the ETF fees is included in the 1.15% (this is the manager's description in the interview).

This might just be me and this may be unfair but as I read the part of the interview that addressed foreign there seemed to be something missing from their process. I can't point to anything specific, its just a feeling I got.

Assume my reaction is dead wrong, I would invite the managers to start a blog and share some process. If I am wrong and these guys really get it everyone comes out ahead.

The manager talks a little bit ETF selection and it seemed like there are a lot of narrow ETFs that they won't consider due to transparency (PowerShares).

Since they don't pick stocks it makes sense to think that they are top down managers. A big part of top down is sector allocation. I think it is tougher to manage sector weights using mostly broad based funds.

It is also difficult to really manage foreign with very broad products as this fund does.

I would lastly note the yield of the fund is only 0.07% (according to Yahoo Finance). While I think a drawback of an all ETF portfolios is low dividends this is really low (it does not get mentioned in the article but this might be what pays the fee).

I am still no fan of an open end fund that only uses ETFs but the interview was a chance to look at the product from the manager's perspective.

Related:

• ETFs mentioned in this article (clicking on a link pulls up articles for the ETF in question): EEM, IYT, IWD, VTV, IWP, and VO.
• Other articles on the Seeking Alpha Network by Roger Nusbaum.

« Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of SeekingAlpha or its management. »