Byron Wien, vice chairman of


was on


the other day talking about his idea for a "radical" asset allocation strategy for 2011. Wien has a very long-term and well-respected track record on Wall Street and anyone wanting to implement his radical strategy could do so with exchange-traded products.

Wien advocates 20% into emerging-market equities. This space has, of course, been very popular over the last few years as returns going into the financial crisis were superior to domestic benchmarks and many emerging-market countries have seen faster recoveries than developed markets. I would avoid broad-based funds like

iShares MSCI Emerging Market Index Fund

(EEM) - Get Report

or the

Vanguard Emerging Market Index Fund

(VWO) - Get Report

because they take in the good and the bad while at the same time blending away various positive attributes that many of these markets have.

Investors have countless narrower funds to build a very customized exposure. Among the types of choices available with easily understood longer-term catalysts for growth are the

EG Shares INDXX India Infrastructure Fund



the Global X Brazil Consumer Sector ETF


or the

iShares MSCI Turkey Index Fund

(TUR) - Get Report

. A combination of specialized funds would be better than one of the broad-based funds.

Wien also believes that high-yield bonds, targeted at 20%, are attractive. There are two very popular ETFs with the

SPDR Barclays Capital High Yield Bond Fund

(JNK) - Get Report

and the

iShares iBoxx High Yield Corp Bond Fund

(HYG) - Get Report

. Recently there has been a new actively managed fund in the space with the

Advisor Shares Peritus High Yield ETF

(HYLD) - Get Report


JNK has a trailing yield of 8.48%, HYG has a trailing yield 8.39% and the Peritus fund is too new to have any yield information. One other possibility is the

SPDR Barclays Capital Convertible Securities ETF

(CWB) - Get Report

. While the 3.11% trailing yield is less than the others, it does capture price appreciation when this group is in favor. One important note is that with bond ETFs the trailing yield doesn't necessarily give any reliable indication of what to expect. Changes in the bond market will be quickly reflected in these ETFs.

Hedge funds also feature prominently Wien's allocation. While there are plenty of exchange-traded-products that replicate hedge fund strategies, investors need to realize that the emphasis here is on the word "hedge" and none of these funds will be up 300% one year because they shorted subprime mortgages or some other equally heroic trade in the future.

IndexIQ has launched several funds in this space including the

IQ Hedge Multi Strategy Tracker ETF

(QAI) - Get Report


IQ Hedge Macro Tracker ETF

(MCRO) - Get Report

and the

IQ Merger Arbitrage ETF

(MNA) - Get Report

. All three funds have done a good job in terms of a low correlation to domestic equities but this also sets some reasonable expectations too. Year to date, all three funds have been close to flat either way while the

S&P 500

is up 11%. If the market had been down a lot then these results would look very good but in this environment where markets are up a little the hedge replicators have been laggards. Had markets been up a lot this year they would have lagged too.

Private equity is targeted at 10% of the allocation. There are a couple of ways into this space including the

PowerShares Global Listed Private Equity Portfolio

(PSP) - Get Report

, a mix of companies that operate funds and actual investment companies. The fund has a decent global footprint with exposures to many countries including Sweden, Canada and South Korea. Buying this fund is buying volatility that correlates very closely to the financial sector. At its worst, PSP was down 80% from its 2007 peak in a very similar fashion to the

Financial Sector SPDR

(XLF) - Get Report


Another 10% goes to real estate. Just about every large ETF provider has a domestic large-cap REIT fund and not surprisingly they cover the same ground. iShares does offer some other funds that while not as popular might offer some differentiation including the

iShares FTSE EPRA/NAREIT Developed Real Estate ex-US Fund

(IFGL) - Get Report

which provides exposure to Hong Kong, Japan and Australia among other destinations, and the

iShares FTSE NAREIT Residential Plus Capped Index Fund

(REZ) - Get Report

which offers exposure to apartments and storage which might make sense if homebuying trends continue to flag.

Wien is partial to U.S. multinationals including companies like

Procter & Gamble

(PG) - Get Report


Johnson & Johnson

(JNJ) - Get Report



(KO) - Get Report

which are all featured prominently in the

iShares Morningstar Large Core Index Fund

(JKL) - Get Report

. Wien suggests 10% for this segment of the market.

The final 10% is split between gold at 5% and a more generic "commodities." There are several gold ETFs with the most recent being the

ETF Securities Gold Trust

(SGOL) - Get Report

. For the other commodities portion investors could consider something broad like the

PowerShares DB Commodities Index Tracking Fund

(DBC) - Get Report

, a slightly narrower product like the

iPath DJ UBS Agriculture Total Return ETN

(JJA) - Get Report

or a single commodity tracker like the

iPath DJ UBS Coffee Subindex Total Return ETN

(JO) - Get Report


While I don't necessarily think following someone else's exact idea is the best way to construct a portfolio, because we may not have access to Wien when he changes this allocation, this does give insight into what someone who knows more than we do about the market thinks for the next year or two.

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At the time of publication, Nusbaum had JNJ as a client holding, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;

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