Eq: Tech

Model Portfolios got some widespread skepticism thrown their direction when a group of academics wrote a paper criticizing their usage. The points centered around conflicts of interests and the fee structure. However, model portfolios are templates for investing and so their optimization might not be the ‘perfect’ formula for everyone. Additionally, of course funds are going to include their own products in model portfolios (even if they have higher fees), because they believe their products are superior. In fact, funds would be violating their fiduciary duty if they didn’t honestly think their own ETF was a better product at a slightly higher fee structure.


FINSUM: Cherry picking better-performing portfolios after the fact is an unfair advantage; many model portfolios have different risk factors.

Companies Newfound Research and Simplify Asset management are partnering on a selection of new model portfolios that are giving investors more options on their equity holdings. The structured alpha portfolios are designed to target different growth offerings and provide different risk exposure. With the four portfolios coming in 20/80, 40/60, 60/40, and 80/20 equity allocations investors will have exposure to equity, rate, and volatility markets to mitigate financial risk. Fund advisors are trying to get outperformance from strategic capital efficiency rather than trying to pick winning stocks at the right time.


FINSUM: Even basic equity/bond allocation strategies in model portfolios are a good way for advisors to drill down the risk in a portfolio.

Exchange-traded funds focusing on environmental, social and governance themes have been one of the fastest-growing market segments in a couple of years, but so far have yet to reach the acceleration in Asia as they have in the U.S. and EU, until now. The most recent data from the Asian Pacific has more than 1.5x as many funds starting in the first half of 2021 than all of 2020. The asset flows are even more staggering. Inflows since in the first half of 2021 are 10x larger than all of 2016, and they have almost already reached 2020’s $2bn. The standout countries are Australie, China, and Taiwan which comprise over 85% of all the ESG ETF assets. Moreover, these trends are expected to continue with more advantages on transparency and liquidity than other market segments.


FINSUM: These are astounding numbers for ESG growth, and faster-growing economies might not have the incoming restrictions to ESG the US could be facing.

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