Select ETF Allocations lets investors in on short-term market opportunities. Citigroup's Smith Barney has expanded its Select Portfolios multiple-discipline account (MDA) program to include an exchange-traded fund (ETF) product with a tactical-sleeve option to help investors take advantage of short-term market opportunities.

Broadly defined, MDAs combine complementary equity investment styles in a single account.

Smith Barney's new "Select ETF Allocations" features models from Barclays Global Investors and Vanguard blended to reflect Citi's asset-allocation recommendations and augmented -- should the investor so choose -- by tactical sleeves drawing on research by Smith Barney's Consulting Group.

Right now, for instance, the Consulting Group -- which provides investment-manager research and marketing support to Smith Barney brokers and to Citigroup Private Bank -- sees a short-term tactical market opportunity in the info-tech sector, according to Consulting Group head James Tracy.

Appropriate fit

At any one time, adds Tracy, Citi is scanning for tactical opportunities in 10 economic sectors and various uncorrelated asset classes, for Select ETF investors. "This is a high value-add program," he says.

The investment minimum for Select ETF is $50,000; half the minimum required to invest in a non-ETF Select MDA. The ETF product also brings a new overlay manager. Placemark Investments aligns trades, manages cash flow and works to enhance the overall tax efficiency of actively-managed SELECT portfolios. Legg Mason Private Portfolio Group (LMPPG) is overlay manager to the ETF MDAs.

Until very recently LMPPG was the MDA group of ClearBridge Advisors -- which, before Legg Mason bought it in 2005, was known as Citigroup Asset Management. In other words, it used to be a sister company of Smith Barney.

Tracy says that LMPPG got the mandate because its capabilities are aligned with the design of Select ETF Allocations. "Placemark has done a wonderful job," he says. "LMPPG was a more appropriate fit for this assignment."

Citi came out of its $3.7-billion transaction with Legg Mason owning more than 14% of the Baltimore-based asset manager.

Among other things, the deal gave Legg Mason a three-year distribution agreement with Citi, one of the biggest investment-product conduits on the planet. When the agreement came to light in June 2005, Legg Mason CEO Chip Mason said this tie-in with Citi -- "a financial powerhouse" -- would "significantly expand" Legg Mason's ability to distribute retail investment products.

Only a year old, Smith Barney's Select program has already pulled in more than $2.5 billion in client assets. Tracy says about 3,000 -- or around 23% -- of Smith Barney's 13,000 or so brokers use the program.

For now Select investments are available only to Smith Barney and Citi private-bank clients. Soon though, it'll also be available to investors through Citi's retail-bank brokers. -FWR

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