On January 10, the SEC approved 11 spot bitcoin ETFs. Vanguard quickly made the decision to not offer a bitcoin ETF. The decision has been met with resistance from customers. Recently, CEO Tim Buckley provided more insight into this decision, given that this has been a constant source of inquiry.

Overall, the firm doesn’t believe that bitcoin is a suitable investment option for a retirement plan, given the asset’s volatility and speculative nature. Buckley also rejects the notion that bitcoin is a 'store of value’, pointing to its severe declines in the past and correlation with equities. For example, bitcoin dropped from $69,000 to $16,000 between 2021 and 2022, while the S&P 500 was down 21% during this period from peak to trough.

Buckley added that he doesn’t believe that Vanguard will offer a bitcoin ETF until something significantly shifts in the asset class. In contrast, Vanguard only invests in asset classes with underlying cash flow. With equities, this refers to the future earnings of a company. For bonds, it can be calculated through a bond’s coupon and principal. Since bitcoin has failed to function as an effective ‘store of value’ and generates no cash flow at the moment, it remains purely a speculative asset, which makes it inconsistent with Vanguard’s principles and ethos. 

Finsum: Vanguard is not offering a bitcoin ETF, unlike many of its major competitors. CEO Tim Buckley shared why bitcoin is more of a speculative asset and unfit for long-term investing. 

2024 has been underwhelming so far for REITs, as evidenced by the iShares US Real Estate ETF’s YTD 4.5% decline, while the S&P 500 is up 9% YTD. Two major reasons for this underperformance are continued struggles for the office segment and less clarity about the outlook for monetary policy, following a series of stronger than expected labor market and inflation data.

However, the intermediate-term outlook for the sector remains favorable due to attractive yields and earnings growth despite a challenging, near-term environment. Further, most segments are in good shape. According to Steve Brown, the senior portfolio manager at American Century Investments, “The REIT industry is very diversified among different sectors like data centers, towers, and industrial, and office is only about 4 or 5 percent of the index. So while office has issues, many other property sectors have pricing power and can raise rents greater than inflation.” 

He also favors public REITs over private REITs, as public REITs are cheaper while offering more liquidity. He notes that many private REITs are still trading at or just above net asset value (NAV), while public REITs are trading at an average 20% discount to NAV. Overall, he sees a much more benign environment in 2024, especially once the Fed starts cutting rates.  

Finsum: REITs have had a rocky start to the year. However, the fundamentals for the sector continue to improve, while many of its challenges are already reflected in depressed valuations.

Navigating social media poses considerable challenges for financial advisors, firm executives, and other professionals, where every post and interaction can potentially impact their professional reputation. However, there's a new strategy emerging, emphasizing the importance of prioritizing the personal aspect first, according to April Rudin, founder and CEO of The Rudin Group.

 This shift represents a departure from previous conventions that primarily emphasized showcasing professional backgrounds. Rudin suggests that delving into personal beliefs, passions, and backgrounds can serve as effective conversation starters and entry points for new business opportunities and recruitment efforts. 

While maintaining professionalism remains paramount, there's an increasing recognition of the value in showcasing one's personality and individuality within the confines of firm guidelines. As social media continues to play an integral role in professional networking and client engagement, Rudin's advice underscores the importance of authenticity and human connection in the digital realm.

Finsum: Standing out in a world of increased AI and robo advisors could mean putting more personality into your practice. 

The traditional perspective on direct indexing as solely an equity investing strategy is shifting, as highlighted by Jonathan Rocafort from Parametric Portfolio Associates, who advocates for its exploration in fixed income portfolios. 

Customized and tax-aware bond ladders present an intriguing opportunity, particularly for advisors with clients nearing retirement. While advisors are well-versed in tax-loss harvesting for equities, Rocafort notes a knowledge gap regarding tax-aware bond investing and the potential for tailored retirement income portfolios at scale. 

Direct indexing in equities involves purchasing individual stocks from an index, enabling tax optimization and customization beyond traditional funds. Similarly, managers can offer customizable bond ladders in municipal, corporate, or Treasury bonds, aligning with investors' values and tax strategies. Despite uncertainty in the interest rate cycle, there's optimism about utilizing fixed income strategies like bond ladders amid potential rate hikes in tax strategies.

Finsum: While it is still not the cheapest strategy, direct indexing could prove useful for HNW clients utilizing bonds as they near retirement.

Apollo Global Management Inc. has launched a new private credit fund, initially offering no fees for the first year and halving fees for the subsequent year, with investments coming from Mubadala Investment Co. and other institutional investors. 

Structured as a business development company, it diverges from the norm by providing fee breaks, unlike many similar vehicles catering to retail and high net worth investors. Contributions from Mubadala and Apollo's affiliate amount to over $290 million, while the fund's assets total over $790 million, predominantly acquired through leverage. 

Named Middle Market Apollo Institutional Private Lending, the fund is an extension of the collaboration between Apollo and Mubadala, established in 2020, focusing on investments in US middle market companies, with a target allocation of 70% to 80% in loans. The fund's filing also stipulates a provision where Apollo would redistribute cash from sales or loan repayments to investors if it fails to double its investment commitments to $900 million within five years.

Finsum: Private credit could provide an uncorrelated return as macro uncertainty permeates markets.