If you’re looking to hedge your client’s portfolio from inflation, consider investment-grade ETFs. That is according to American Century Investments client portfolio manager Balaji Venkataraman. He spoke at the recent ETF Exchange conference in Miami Beach and noted how the Fed’s moves played a role in the dismal performance of bonds last year. However, he also added that investors may see increased value in fixed-income vehicles this year. He stated, “The rate risk has subsided meaningfully because the fixed income market tends to price in where the Fed is going well before the Fed gets there. And that’s why we’ve seen a decline in yields here today.” Venkataraman also noted that investment-grade bonds, which are a debt of higher-grade securities, could be critical investments during periods of heightened inflation, as yields begin to fall in response to the Fed easing rates. He stated, “The beauty of fixed income in this environment, if the Fed eventually does [come to] its peak in terms of the terminal rate, bond yields should probably continue to come down.” While bonds saw their worst year on record last year, fixed-income ETFs continued to see inflows. That trend continued into this year, as bond funds saw $20.8 billion in inflows in January, the most of any asset class last month, according to ETF.com data.  

Finsum:According to American Century Investments client portfolio manager Balaji Venkataraman, investors should consider investment grade bond ETFs during periods of heightened inflation, as yields begin to fall in response to the Fed easing rates.

Parcl recently announced the launch of the real estate investment platform Parcl Protocol, allowing users to trade the price movements of real estate markets around the world. Its users can now invest in or trade specific geographical markets, which can be used for directional investment and hedging strategies in a traditionally opaque and walled-off asset class. Parcl is a digital real estate protocol built on Solana, a blockchain specifically designed to host decentralized and scalable applications. Through the Parcl Protocol and leveraging data provided by Parcl Labs, Parcl facilitates real estate investment. It provides exposure to cities in the United States such as New York City, Miami, Phoenix, and Los Angeles, while international cities such as Paris, London, and Singapore will be coming later this year. Users can browse global real estate markets, gain detailed insights, and have the opportunity to either buy or short real estate markets based on whether they think the real-world property values will increase or decrease. The platform is also built differently than other real estate platforms such as Yieldstreet, RealT, or Fundrise as it takes a new approach to increase liquidity and improve scale by using derivatives. The derivatives can improve diversification and add stability to a portfolio.

Finsum:Parcl launched the real estate investment platform Parcl Protocol, which allows users to trade the price movements of real estate markets around the world.

Vanguard, which is the second-largest ETF issuer, is planning to go all in on direct indexing. That is according to Tim Buckley, Vanguard CEO, as he was being interviewed on stage at the recent Exchange ETF conference. Buckley said that Vanguard looked at direct indexing years ago and started thinking about it. He stated, "What's a way that you could disrupt the ETF or the mutual fund? You always should be looking if there is a better way to do it." While direct indexing has existed for some time, it is typically only reserved for the "ultra, ultra, high-net-worth," according to Buckley. The CEO added "And we can see that … there's huge tax benefits for a lot of investors in using direct indexing." He said that the idea of creating portfolios that don't undermine people's retirement but let them invest in line with their values was something the fund firm found interesting. Instead of hoping that direct indexing would go way, Buckley said Vanguard decided to embrace it and "see if it is a better way to do something." He added, "And we'll find out over time. But we'll be investing heavily." The fund giant, which manages $2 trillion in assets across 81 US-listed ETFs, started its move into direct indexing in October of 2021, with its purchase of Just Invest and its direct investing platform, Kaleidoscope.

Finsum:According to Vanguard’s CEO Tim Buckley, the fund firm plans to go all in on direct indexing as there are huge tax benefits for a lot of investors.

With market volatility still a concern among clients, private equity firms are positioning themselves as an option for advisors looking to minimize the impact of volatility in their client’s portfolios. Steve Brennan, head of Private Wealth Solutions at Conshohocken, Pennsylvania-based Hamilton Lane, told Financial Advisor magazine, “A benefit to a private equity fund is that it is a long-term investment vehicle that gives an investor an extended period to invest their money and protect it from the turbulence of the markets.” Private equity proponents say that the lower volatility typically outweighs the negatives of private equity, including high fees and illiquidity. Brennan said “The time horizon for investors in the private markets is ... a much longer time period so you’re not seeing the volatility in the private markets that you would see in the public markets.” Alexis Weber, chief investment officer and founder of PM Alpha told the magazine that a client’s private equity allocation should be fluid. He suggested a range of 5% to 20%, but also cautioned advisors that it depended upon the client’s risk tolerance. He also mentioned that private equity can be a benefit to an advisor looking to distinguish themselves from their competitors. He stated, “Really having the right level of allocation to these instruments allows them to differentiate their services and their portfolio construction approach from other peers.”

Finsum:Private equity firms are positioning themselves as an option for advisors looking to minimize volatility for their clients as well as differentiate themselves from their peers.

Morgan Stanley’s new exchange-traded fund platform will focus on actively managed funds, with Anthony Rochte, global head of ETFs at Morgan Stanley, seeing a “significant uptick in active transparent fixed income purchasing.” Rochte told ETF.com at the recent Exchange conference in Miami that “There's no doubt active management is where we're focused in additional series of ETFs. At the core of Morgan Stanley Investment Management is active management; that’s what we do.” The financial services giant made its return to the ETF industry on February 1st with the launch of six Calvert ETFs, including an active ultra-short investment grade ETF. Rochte stated that the firm is looking to launch funds across its Calvert, Eaton Vance, and Morgan Stanley brands. More specifically, he stated, “In the next suite of products you could expect to see from us, the ETF platform would be active, transparent.” According to ETF.com data, $57.4 billion flowed into active products last year as passive investments were hammered by the markets. Active funds comprise $407.9 billion of the ETF market, with many financial professionals seeing that segment growing. Currently, there are 1,027 actively managed ETFs in the U.S. market. With Morgan Stanley looking to add to its product suite, transparent, fixed-income products are squarely in focus, according to Rochte.  

Finsum:With many financial professionals expecting the active ETF segment to grow, Morgan Stanley is looking to add to its product suite with a focus on actively managed transparent fixed-income funds.