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ETFs: With SEC Settlement Over, F-Squared Moves Ahead

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T he new CEO of F-Squared, the largest ETF strategist, is ready to put the old stuff behind.

"It's done. We came to a resolution" with the U.S. Securities and Exchange Commission, Laura Dagan told IBD. She spoke on the sidelines of ETF.com's eighth annual Inside ETFs conference, taking place in Hollywood, Fla., Jan. 25-28.

"I was hired to be CEO of the future, that's what I am focused on," Dagan said, while adding: "There's always room for improvement."

The past that Dagan wishes to put behind is the SEC's yearlong probe into whether F-Squared inflated the returns of a flagship strategy to its clients for seven years through 2008. In November, former CEO Howard Present stepped down and was replaced by Dagan. The deal with the SEC, announced Dec. 22, included paying a $5 million fine and disgorging $30 million in profits.

For Dagan, focusing on the future means a renewed emphasis on what F-Squared believes it does best.

"I want protection when there are losses and I want to participate in the upside," Dagan said, summing up the appeal of the company's flagship products.

That core company philosophy, she added, led her to become a seed investor in its three original strategies.

It's also propelled the firm's rise up the ranks of ETF strategists. F-Squared is among the managers who build portfolios using exchange traded funds. These strategies have surged in popularity with financial advisers who use them to allocate client money. At the end of 3Q 2014, F-Squared reportedly had roughly $25 billion out of the roughly $96 billion in ETF managed portfolios. Industry assets in these strategies totaled $14 billion just five years ago.

F-Squared focuses on providing real wealth appreciation to investors, according to Dagan. "It's not just beating a benchmark," she said. "It's filling a niche: what do certain investors want, how do we provide risk-adjusted returns. We're looking to provide strategies that have less drawdown."

As passive indexing funds outperform in a bull market, analysts recently have raised concerns about the value being delivered by ETF managed portfolio strategies .

Dagan retired in 2010 from her role as chairman of Dwight Asset Management Co., a fixed-income investment manager for institutional clients.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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