Clark Allen

Clark Allen started in public accounting doing M&A valuation work, moved into institutional asset management at insurance companies, then into a single family office for a multi-billion-dollar family before landing at Horizon Investments as Head of ETFs. Horizon itself was born out of a wealth manager in the mid-1990s. The firm evolved into a strategist business during the model portfolio boom, expanded to nine mutual funds, sub-advised active ETFs for First Trust (three low-volatility products launched in 2016), and recently launched its own ETF lineup. Horizon views itself as a solutions provider, not just an asset manager. Their two key mantras: empower advisors and fuel advisor growth.

On this episode of Behind the Ticker, Clark talks with Brad about BENJ, the Horizon Landmark ETF. It's a cash management strategy using box spreads that delivers T-Bill-plus returns without kicking off income, which has significant tax implications for how advisors can build portfolios.

Box Spreads as Cash Management

BENJ uses one-to-three month box spreads in the options market to generate T-Bill-like returns. A box spread is effectively a loan to the OCC (Options Clearing Corporation), which means the credit risk is the OCC itself. If the OCC fails, you won't get paid, but as Clark put it, "OCC failing would be the least of our concerns at that point." The OCC has been around since the early 1970s, well-capitalized, and has never defaulted.

The key differentiator isn't the return level. It's what doesn't happen: the fund doesn't kick off income. For advisors running model portfolios, this is a meaningful innovation. The traditional approach to tax-efficient portfolio construction forces you to put all fixed income in qualified accounts (IRAs, 401ks) and equities in non-qualified taxable accounts, then optimize from there. But what if you had an ETF in your cash or liquidity bucket that didn't generate taxable income? You no longer have to compromise on tax location. You can put BENJ in a taxable account without generating a tax drag.

Goals-Based Portfolio Construction

Horizon builds distribution portfolios with a specific philosophy that they were practicing before "goals-based" became a buzzword. The idea is to connect a product to a financial plan across accumulation, preservation, and distribution phases. Their distribution portfolios overweight equities relative to peers but maintain a large "steady reserve" or liquidity bucket. The behavioral insight is powerful: if you know your liquidity bucket can fund spending needs for the next several years, you can stomach the volatility in the equity portion of the portfolio. BENJ was designed specifically for that liquidity bucket.

Clark described a common frustration: an advisor spends an hour or two on a financial plan, then has a convoluted set of securities and active mutual funds that nobody can explain in terms of how they connect to the plan. Horizon uses in-house technology to connect products to plans explicitly. BENJ fits into that framework as the liquidity component that doesn't create tax friction.

The Broader Tax-Efficiency Trend

Clark sees BENJ as the beginning of a much broader trend. "What if you had ETFs that didn't have to kick off that income?" he asked. He expects more products across aggregate bonds, high yield, and other fixed income allocations, all structured to avoid generating income. The tax-efficiency advantage of the ETF wrapper is just starting to be exploited in fixed income, and he thinks this is year one of a multi-year shift that will reshape how advisors build portfolios.

Horizon's ETF Roadmap

Horizon also launched HBTA alongside BENJ, and Clark said it's going to be a busy year with more products coming. They've filed for seven more ETFs. The firm's approach to ETF issuance is different from most: they're not looking to push single hot-ticket products. "You're not going to see me come to market and talk about a single ETF much," Clark said. "It's always going to be centered around solutions for advisors that fit into their practice."

On the sub-advisory side, Horizon manages three low-volatility ETFs for First Trust, launched in 2016. Low vol has been a tough factor for six years of underperformance, but Clark holds the long view: "It'll have its day." The firm also runs a custom portfolio business with custom SMAs and tax management. The ETF expansion is about filling the one gap they didn't have in their solutions lineup. When an advisor came to them wanting to work in a specific way, they didn't have their own ETFs to offer. Now they do.

Key Takeaways

• BENJ uses one-to-three month box spreads to deliver T-Bill-plus returns without generating taxable income, a meaningful innovation for tax-efficient portfolio construction in taxable accounts.
• The credit risk is the OCC itself, established in the early 1970s with no defaults. If the OCC fails, the broader financial system has bigger problems.
• Horizon builds goals-based distribution portfolios with a large liquidity bucket. BENJ was designed to fit that specific role without creating tax friction.
• Clark expects a wave of income-free fixed income ETFs across agg bond, high yield, and other sleeves, calling this year one of a broader multi-year trend.
• Horizon has nine mutual funds, sub-advises ETFs for First Trust, and has filed for seven new ETFs this year. Their approach focuses on advisor solutions rather than single-product pushes.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.