White-label exchange-traded fund provider HANetf recently launched a range of model portfolios allocating to both in-house and third-party products. The portfolios were launched in collaboration with London-based financial technology firm Algo-Chain. The six portfolios are targeted at financial advisors, wealth managers, private banks, execution-only brokers, robo-advisors, and other money managers who offer ETF portfolios to their clients. HANetf’s balanced, growth, and adventurous model portfolios use ETFs to provide exposure to equities, fixed income, commodities, and alternative assets. Each portfolio provides a different asset allocation, different risk levels, target volatility, and target maximum drawdown. The firm’s ESG growth portfolio is a multi-asset portfolio that invests in impact investing and ESG-themed ETFs. According to HANetf, third-party ETFs are used where appropriate for the first four portfolios. The Future Trends Themed Equity and Digital Assets and Crypto ETP portfolios, on the other hand, allocate exclusively to HANetf funds. The Future Trends Themed Equity portfolio seeks to invest in ETFs that have exposure to the latest megatrends and themes, while the Digital Assets and Crypto model invests in exchange-traded products that give exposure to some of the largest cryptocurrencies, and an ETF with exposure to the blockchain and digital assets sector.

Finsum:White-label ETF provider HANetf launched six model portfolios, including balanced, growth, adventurous, ESG, future trends, and crypto portfolios.

Model portfolios? Nope; they’re not exactly collecting dust. As of March of last year, they were home to nearly $350 billion in assets, according to thinkadvisor.com. Did some say increase? Must have, because that represents a jump of 22% over the prior nine months, reported Morningstar in June. 

Using model portfolios, of course, investors are able to leverage simple, effective investment methods, according to smartasset.com. The icing on the cake: minimal management is needed.

In an idyllic world, a combo of management investments based on deep dive research is behind every portfolio.

Naturally, it’s not all sugar and spices. Your asset management goes at least partially by the wayside when you put a model portfolio in your arsenal. Now, if you don’t like the idea of acquiescing total control of your cash to a financial advisor, well, a model portfolio might not be your cup of java.

And performance? No different than any other investment: guarantees: forget it. After all, professional management doesn’t translate into automatic performance.

Hey, naysayers – and don’t pretend you’re not paying attention -- on the heels of negative returns last year, in 2023, potentially, fixed income asset classes will come up with an improved total return performance, according to etftrends.com

In October and November, as risk markets hit the comeback trail in conjunction with indications that inflation was receding, positive momentum found its mojo. Those strides opened the gates for investors to sniff outside of interest rates that hit nosebleed levels -- even though market volatility probably isn’t headed for the door. That’s because the U.S. economy continues to pose challenges.

Given the Fed took actions that seduced rate hikes during 2022, U.S. Treasuries have up ticked big time. Consequently, the site stated, investors should contemplate a greater allocation of assets to the asset class.

Meantime, through passive investment strategies, investors still will be exposed to broad market beta, a trifecta these days of burgeoning inflation and interest rates along with greater dispersion across fixed income sectors and regions is the motherlode for skilled active management, according t0 wellington.com.

While direct indexing is expected to see wider engagement this year, it isn’t ready to take over the wealth management industry quite yet. That is according to Anton Honikman, CEO of MyVest, who stated “I’m not necessarily of the view that 2023 will be the year that direct indexing becomes broadly democratized. There’s a different discussion about bringing direct indexing to a broader market. What’s hindering that is the need for more of an experience with direct indexing.” Honikman says the necessary building blocks for direct indexing are in place such as access to fractional shares, commission-free trading, and portfolio management technology capable of handling the nuances of direct indexing. However, the technology to unlock its full potential is not in place, according to Honikman. That technology would enable the “true personalization” of financial plans and portfolios at scale. For now, Honikman believes that it makes more economic sense for firms to serve down-market clients with the next best alternative: low-cost, tax-efficient, ETF-based portfolios. Honikman says 2023 will be a year that technologists and wealth management firms continue to invest in personalization by focusing on building the onboarding experience and the data collection, management, and reporting capabilities that will eventually enable direct indexing.

Finsum:Anton Honikman, CEO of wealthtech firm MyVest, believes that direct indexing isn’t ready to take over the wealth management industry until technology such as data collection and reporting that would enable the “true personalization” of portfolios is put in place.

As investors increasingly buy ESG funds, there has also been an increase in academic research on the impact of implementing ESG constraints on equity portfolios. However, there hasn't been as much attention paid to research on ESG fixed-income investing. Inna Zorina and Lux Corlett-Roy published their study “The Hunt for Alpha in ESG Fixed Income: Fund Evidence from Around the World,” in the Fall 2022 issue of The Journal of Impact and ESG Investing. In the study, they examined whether ESG fixed-income funds generate out- or under-performance after controlling for systematic fixed-income factors. They found that while ESG fixed-income funds with a higher level of risk generally produced higher returns, most ESG fixed-income funds did not produce statistically significant positive or negative gross alphas. In fact, only 7% of funds managed to deliver greater returns at a lower level of risk relative to the respective benchmark. The study revealed that across ESG fixed-income funds with a European, U.S., and global focus, performance was mainly driven by systematic fixed-income factor exposures such as term and default risk. The results led Zorina and Corlett-Roy to conclude: “ESG fixed-income mutual funds and ETFs have not consistently delivered statistically significant gross alpha controlling for key fixed-income factors. The majority of alphas are statistically insignificant and therefore indistinguishable from zero. This conclusion is similar across fixed-income funds with a European, US, and Global ESG investment focus.”

Finsum:A recent study that looked into whether fixed-income ESG funds provided outperformance revealed that ESG fixed-income mutual funds and ETFs have not consistently delivered statistically significant gross alpha.