Lattice Strategies Introduces Risk-First Investment Paradigm with ETF Family Launch

Funds Occupy Space between Active and Passive, Seeking Advantage through Intentional, Efficient Allocation of Risk

SAN FRANCISCO--()--Lattice Strategies, an investment management firm that seeks long-term capital growth through the disciplined and deliberate allocation of risk, announced that its inaugural suite of exchange-traded funds (ETFs) began trading today on the New York Stock Exchange. The three equity ETFs making their debut are Lattice Emerging Market Strategy ETF (NYSE: ROAM), Lattice Developed Markets (ex-US) Strategy ETF (NYSE: RODM), and Lattice US Equity Strategy ETF (NYSE: ROUS).

Lattice is not new to the ETF space. It was an early proponent of ETFs, launching its Liquid Endowment Strategies in 2007 and developing custom strategy indexes that power private-label ETFs, with each investment solution designed to reallocate risk to drive capital growth. As of December 2014, approximately $1.7 billion was managed to investment strategies developed by Lattice for retail and institutional investors.

Lattice’s ETFs are based on the firm’s conviction that the disciplined, intentional and systematic allocation of risks is the most influential contributor to long-term growth of capital. Consequently, the firm’s ETFs have been structured with the aim of asserting control over the unintended and often overlooked risks in specific asset classes, providing investors access to pioneering investment strategies – core portfolio building blocks – designed to improve investment outcomes.

“Inefficient allocation of risk in both passive and traditional active investment approaches is a problem confronting many individual and institutional investors, with many having limited awareness of the issue or its consequences,” said Lattice’s Managing Partner, Theodore Lucas. “All too often, risk allocation is the consequence rather than the driving force behind portfolio composition, resulting in inferior long-term growth potential, undermining the most fundamental goal of investing.”

Inefficient Allocation of Risk

To illustrate his point, Mr. Lucas refers to broad market capitalization-weighted equity indexes as an example of unintentional and inefficient risk allocation. These highly popular indexes offer a compelling performance advantage; they have a higher probability of outperforming the universe of traditional active managers benchmarked to them since the aggregate of active investor portfolios is the market. However, the risk distortions inherent in such indexes often result in high concentration in relatively few companies, countries, and/or currencies, depending on the region they represent. Such risk allocation distortions not only present high concentration risk, but likewise result in underrepresentation to the fuller opportunity set across these dimensions.

If a cap-weighted index portfolio is not risk/reward efficient, it very likely follows that the vast majority of active portfolios benchmarked to these indexes are equally inefficient, given that most seek to limit tracking error caused by material deviations to index exposures and hew closely to benchmark characteristics.

“We’re not disavowing cap-weighted indexing, but rather highlighting the unintended drift of risk allocation an investor is accepting, along with the risk concentrations and underrepresentations that challenge cap-weighted index risk efficiency,” Mr. Lucas added.

The strategies upon which Lattice’s ETFs are constructed have broken new ground in the ETF industry in that they inhabit the space between active and passive ETFs. They are “active” in the sense that the resulting exposures differ from the benchmark in expressing more efficient risk allocation, and “passive” in the sense that they are regularly rebalanced and reconstituted according to a systematic and transparent process codified in an index. This enables the funds to deliver the potential risk-adjusted return benefits of active management coupled with the transparency, cost, and rules-based advantages of indexing.

“Our years of research into the risks inherent in traditional approaches confirms that superior results may be achieved by taking better risk, and by that we mean a focus first, directly, and deliberately on the efficient allocation of risk within each asset class and across a portfolio,” notes Darek Wojnar, Lattice’s Head of Single-Asset Strategies and President of the Lattice Strategies Trust. “This deliberate reallocation of risks – not the avoidance of them, but rather the intentional reallocation of them in a more efficient way – can result in improved portfolios that address significant structural risks without sacrificing long-term return potential.”

About Lattice Strategies

Established in 2007, Lattice Strategies is an investment management firm that employs risk-first thinking as the cornerstone of its investment approach. Lattice believes that the disciplined and intentional allocation of risks is the most influential contributor to real long-term growth of capital. As such, the identification and allocation of risks remains at the forefront of everything Lattice does on behalf of investors. The firm’s suite of products includes multi-asset solutions, strategy indexes and a family of ETFs. As of December 31, 2014, approximately $1.7 billion of institutional and retail assets was managed to investment strategies developed by Lattice. For more information, visit and

Investors are reminded that all investing involves risk, including possible loss of principal. Consider the Funds’ investment objectives, risks, charges, and expenses carefully before investing. A prospectus with this and other information about the Funds may be obtained by visiting or by calling 415-315-6600. Read the prospectus carefully before investing.

The Funds are new and have limited operating history. Tracking error is a measure of how closely a portfolio follows the index to which it is benchmarked. Investors cannot invest directly in an index.

Darek Wojnar, CFA, is a registered representative of ALPS Distributors, Inc.

Lattice Funds are distributed by ALPS Distributors, Inc.


Water & Wall Group
Alex Gambale, 212-343-2364


Water & Wall Group
Alex Gambale, 212-343-2364