In a piece for AdvisorHub, advisor transition company - 3xEquity - shared some lessons for advisors from Twitter’s rebrand. While Twitter has been on a strange journey over the last few years and is now known as X, there are some important takeaways for advisors who are starting with a new firm. 

For one, the most important task is to introduce the new brand to existing clients and stakeholders. With this, it’s important to be consistent with the new branding to ensure there is no confusion among your clients. 

For advisors who are considering moving to a new firm, they should ensure that the new firm’s transition team is sufficient enough to handle the workload in order to ease the move. Additionally, an advisors’ time should be spent communicating with clients rather than handling paperwork or back office functions. 

Re-branding is also another consideration for advisors who are selling their firm, especially as many advisors now are choosing a hybrid phased selling model. With this model, advisors may work as employees and are slowly phased out of the new firm to maximize client retention. This can also lead to confusion among clients so it requires constant communication about the transition process.

Finsum: The transition process can be difficult for advisors who are moving to a new firm. Here are some lessons from Twitter’s re-branding for advisors on what to do and what not to do.

Active fixed income has underperformed for the last 4 quarters due to the sharp increase in rates and tightening of spreads. However, the asset class could be poised to outperform as the Fed pauses and offers the best way for investors to take advantage of higher yields according to Sage Advisors Chief Investment Officer Rob Williams. 

Williams sees the Fed’s current rate path as being data dependent. This period could last for several quarters and offers specific advantages for active fixed income given its ability to tap a wider variety of duration, sectors, and risk to generate alpha. 

Eventually, Williams sees the yield curve steepening as the Fed inevitably shifts from ‘pausing’ to cutting. This process is likely to be volatile given the underlying resilience of the economy and labor market, and active fixed income tends to outperform in volatile markets.  

Active managers also have the ability to identify value in the fixed income space to improve return and risk factors. Due to volatility compressing in 2023, spreads have also tightened as well. This means that security selection has a more meaningful impact on returns and risk. 

Finsum: Active fixed income offers specific advantages to investors that are especially relevant if the Fed is pausing rate hikes and remaining ‘data-dependent’. 

In Marketwatch, Christine Idzelis discusses with Blackrock’s Rick Rieder his current thinking about fixed income given the recent selloff in Treasurie. Rieder is the Chief Investment Officer of Fixed Income for Blackrock and also the manager of the Blackrock Flexible Income ETF, its recent active fixed income ETF launch. The fund offers a 7% yield and invests in a mix of government debt, corporate credit, and securitized assets. 

Since inception in late May, the ETF has generated a 1.2% total return. In contrast, popular bond ETFs like the iShares Core U.S. Aggregate Bond ETF and Vanguard Total Bond Market ETF are down about 2% over the same time period. He attributes his outperformance to keeping “interest-rate exposure low” with a duration of 2 years. 

The majority of weakness in the fixed income market in recent weeks has been concentrated in long-duration assets. He believes that active fixed income ETFs offer exposure to areas like mortgage-backed securities and high-yield bonds. Rieder also believes that active fixed income is best suited to navigate the current market environment which offers very attractive yields but performance is likely to be bifurcated as long as rates continue to rise.   

Finsum: Rick Rieder, the CIO of Blackrock Fixed Income and portfolio manager of its active fixed income ETF, shares his thoughts on the current macro environment and benefits of active fixed income.

As the summer ends and fall rolls around, it’s natural to expect a surge in market volatility. This is even more relevant this year given that stocks have enjoyed a period of low volatility and gently rising prices throughout most of the summer despite a variety of challenges such as rising rates, stubborn inflation, and pockets of weakness in the economy.

Further, history shows that periods of sharp increase in rates can often trigger stress in parts of the financial system that can have knock-on effects in the real economy. The most recent example is the crisis in regional banks due to an inverted yield curve which could have negative effects on the flow of credit in the economy.

For ETFTrends, Ben Hernandez discusses how direct indexing benefits from these surges in volatility. Direct indexing differs from traditional investing in funds as it allows investors to re-create an index in their portfolio. 

This allows tax losses to be harvested as losing positions can be sold with the proceeds re-invested into stocks with similar factor scores. Then, these losses can be used to offset gains in other parts of the portfolio, leading to a lower tax bill. 

Finsum: Direct indexing has many benefits but the most impactful in terms of alpha is its ability to generate tax savings for clients during volatile markets. 

REIT stocks are slightly down YTD. On the bright side, yields are at their highest level in decades, defaults have not materially risen and occupancy rates have been stable. However, this has not been substantial enough to offset the headwind from rising rates.

This headwind is only getting more potent with yields on longer-term Treasuries breaking out to new highs which is bearish for the asset class given its embedded leverage and exposure to rates. Higher rates also are impacting demand and leading to lower affordability. 

The most damage is evident in commercial real estate, where REITs are trading close to their lows while REITs with exposure to healthcare, industrial, or residential sectors are performing much better. This is mostly a reflection of a structural change following the pandemic as companies cut back on office space. 

In the event that rates remain at these lofty levels, REIT stocks are likely to underperform. However, the current weakness in the sector could present a long-term opportunity to accumulate REITs that continue to grow their earnings and use the weakness in the sector to add high-quality holdings at attractive prices.

Finsum: REITs are moving lower as Treasury yields break out to new highs. While higher yields are a major headwind, the current selloff is likely to create some attractive opportunities.