It appears that the growing adoption of model portfolios is driving inflows into municipal ETFs. In fact, this year’s inflows to muni ETFs are double the average of the last three years, with total assets sitting at $105 billion. Investors added a record $27.8 billion into muni-bond ETFs this year. Mutual funds, on the other hand, lost more than $130 billion. According to estimates by Drew Pettit, director of ETF analysis and strategy at Citigroup Inc, nearly half of the inflows came from mutual fund holders selling shares at a loss to offset gains and swapping into ETFs. The continued adoption of model portfolios by advisors should contribute to even more muni ETF growth. In an article on WealthManagement.com, it was noted that model managers such as FMR LLC’s Strategic Advisers, Wealthfornt Advisors, and Creative Planning are some of the largest holders of Vanguard and Blackrock muni ETFs. Pettit indicated that advisors like automated, off-the-shelf products which allow them to focus more on client relationships and growing their business. In a recent interview he stated that “When model portfolios get their teeth into an ETF or a group of ETFs, you start to see this stable, almost constant, drip of money coming into these products. And it’s really hard to unseat that.”

Finsum:Muni Bond ETFs saw a record $27.8 billion in inflows this year as a result of the growing adoption of model portfolios by financial advisors.

While many states are rushing to adopt an annuity sales rule revision, there are still some that are using the National Association of Insurance Commissioners (NAIC) old sales rules and are not likely to move to the new version anytime soon. The NAIC adopted the Suitability in Annuity Transactions Model Regulation in 2010. The model required annuity sellers to verify that the annuities sold to consumers suit those consumers’ needs. In 2019, the SEC adopted Regulation Best Interest, which requires annuity sellers to document that they have acted in the best interests of annuity clients, rather than putting their interests first. The NAIC then adopted suitability model changes that were based on the SEC’s Reg BI standard in 2020. This has resulted in state officials that support Reg BI and those that oppose Reg BI. The states that haven’t moved to the new model are considered gray zones due to a map created that reflects the NAIC’s understanding of state adoption efforts. The states colored gray on that map indicates that they are far from implementing the NAIC’s 2020 suitability model changes. They include larger states such as California and Florida as well as smaller states such as New Hampshire and Vermont. The NAIC’s Annuity Suitability Working Group presented the implementation map Wednesday at the NAIC’s fall national meeting

Finsum:The NAIC updated its suitability model for annuity sales based on the SEC’s Reg BI, but several states are nowhere near close to adopting the new model.

Thornburg Investment Management recently introduced Thornburg Personal ESG Portfolios, a new separately managed account capability that can provide investors with the ability to emphasize ESG factors within their portfolios. The firm, which has $40 billion in client assets, said in a press release that “ESG is an organic extension of Thornburg's core investment competencies as a fundamental, bottom-up, active manager of global equities and global fixed income.” Thornburg will not outsource the ESG decisions. Instead, its analysts and portfolio managers will evaluate ESG information alongside other factors, grounded by materiality standards from the Sustainability Accounting Standards Board. The ESG Portfolios will be available through select financial advisory firms and platforms. As part of the announcement, Jason Brady, president & CEO of Thornburg investment management stated "We know that investing with ESG criteria can mean different things to different people. By addressing both these factors in Thornburg Personal ESG Portfolios, we seek to offer a unique opportunity for investors to personalize their portfolios to their ESG values."

Finsum:Investors will now have even more access to ESG-focused SMAs with the launch of the Thornburg Personal ESG Portfolios.

There is no doubt that government bond and corporate debt markets have taken a beating this year due to inflation and rising interest rates. But that may change next year if two fixed-income strategists are correct. On Tuesday, Gurpreet Gill, macro strategist, global fixed income at Goldman Sachs Asset Management said that “The year ahead is shaping up as the most promising for fixed income in over a decade.” While speaking at the Edelman Smithfield Investor Summit in London, Gill noted that valuations in fixed-income markets were looking more appealing than they were a year ago. This included emerging markets and corporate bonds. She stated, "We think it makes sense to be in high-quality short-duration assets, in agency mortgage-backed securities markets in the U.S." Gill isn’t alone in those thoughts. Sara Devereux, global head of Vanguard Fixed Income Group, said last Friday that “The recent debt rally brought the chance to reduce credit exposure and buy mortgage agency securities based on valuations, setting up what promises to be a bond picker’s paradise in the new year.”

Finsum:Two fixed-income strategists expect next year to be a great year for bond pickers due to lower valuations.

CAIS, a leading alternative investment platform, recently announced that global private equity firm Warburg Pincus selected CAIS to help expand its reach to independent advisors. CAIS provides financial advisors with a broad selection of alternative investment strategies, including hedge funds, private equity, private credit, real estate, digital assets, and structured notes. Warburg Pincus has more than $85 billion in assets under management and an active portfolio of more than 255 companies. Through the collaboration, CAIS will onboard a selection of Warburg Pincus funds to its platform, where they will be accessible to its vast independent advisory firms and teams. The private equity firm is looking to benefit from CAIS’ data-rich dashboard, which helps measure product interest and engagement from wealth management professionals using the platform. Chip Kaye, CEO of Warburg Pincus had this to say about the collaboration between the two firms, "This partnership helps us introduce our fund strategies to a wider audience of financial advisors and their clients. Having already served the independent wealth management ecosystem for more than a decade, CAIS provides the reach, knowledge, and technology stack required to bridge the gap between alternative asset managers and fiduciary professionals."

Finsum:Warburg Pincus is looking to expand the reach of its private equity funds to independent financial advisors through the CAIS investment platform.