We track the Lipper indices and we stay as close as possible to those indices. One of the great features about the composition of the Lipper ETF indices is that the new ETFs that come into the marketplace provide the opportunity to build diversification into a mutual fund that was difficult to achieve before. There are so many new ETFs for different market niches, geographies, currencies or commodities and even more in the pipeline as I understand it. In fact, there are so many ETFs in the marketplace now, almost to the point of saturation, that advisors and investors alike have become confused in terms of not only how to differentiate them but also how to use them effectively in portfolios.

With the ETFs, you even have the opportunity to build hedging strategies. There are ETFs available now that actually allow you to short certain indices, which you generally would not see in a mutual fund. Unlike a traditional equity manager, we don’t have to pick the right stocks in our space and diversify them. Using the Lipper Funds, we can pick 14 different ETFs in 14 different sectors, geographies, or asset classes and gain exposure to 2000 or 3000 different underlying securities. That basis provides very interesting portfolio modeling opportunities for us.

Q:  Could you give us some background information on your company? How did you arrive at the decision to provide these specific types of funds?

A: Hennion & Walsh, with our principal headquarters located in Parsippany, NJ, opened its doors back in 1990 and was founded by partners Richard Hennion and William Walsh. The foundation of the firm rests in conservative fixed-income investing with a specialty in tax-free municipal bonds. That conservative philosophy extended over to the growth/Equities side of the business, when they hired me three years ago to build the conservative growth component to our client portfolios.

Combining asset allocation with ETFs was a natural extension of that philosophy. We manage 13 different proprietary unit investment trusts (“UITs”) under the brand name SmartTrust, which range in investment objective from tax-free income to taxable income to growth to a combination of growth and income.

We also offer fee-based managed money programs to individual investors as well as small-mid sized company 401(k) plans. These managed money programs offer access to diversified portfolio solutions through mutual fund wrap portfolios and separately managed accounts.

Finally, we now have the SmartGrowth Lipper Mutual Funds to offer as another conservative growth investment option. However, this product is not designed only for our clients; rather, it responds to a particular need we see in the marketplace. To this end, we have hired SEI Investments Distribution Co. to serve as the Distributor for the Funds and we are working in partnership with them to get the Funds up on many of the leading platforms in the industry for Brokers and Advisors to access.

Q:  Looking at the big picture, where do you believe the majority of investors belong in terms of demographics, income, wealth, or asset class?

A: Target Maturity Funds have a pre-set strategy that is the same for all investors in certain age bracket, regardless of their specific demographics, needs, or resources. Yet, when investors aren’t forced into that type of “one size fits all” structure, in other words, when they are allowed to pick their own asset allocation strategies, often working closing with their Financial Advisors, they tend to select a moderate or a growth portfolio, regardless of their age. To this end, I believe that the majority of new deposits into asset-allocation funds go into the growth-oriented or the moderate asset allocation strategies.

The SmartGrowth Lipper Funds allow investors to work with their Financial Advisors to determine the most suitable risk profile for their particular needs. Of course, if an investor starts with a growth oriented fund, that doesn’t mean that he/ she wouldn’t be able to move into the Moderate or the Conservative Fund if the need arises in the future.

To reiterate, one of the important features of our Funds is that they are not predetermined to provide a certain weighting in high-level asset classes, such as bonds and equities, and then constrained to optimize only in the traditional sub-asset classes. Rather, the SmartGrowth Lipper Funds provide exposure to more niches, sectors, currencies and commodities than you will see in most other target maturity or asset-allocation lifestyle products sold in the market today.