FINSUM

FINSUM

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Last week, over $10.2 billion went into U.S.-listed ETFs, with the majority going into fixed-income funds. Bond ETFs pulled in $4.5 billion according to ETF.com data. This followed the previous week’s $7.8 billion in inflows that went into bond funds. In the first week in January, fixed-income products pulled in $9.4 billion, a jump from $1.5 billion in the last week of December. Investors are flocking to fixed-income exchange-traded funds as recession warnings ring louder. Investors are jumping from stocks to bonds as they are often seen as a safer investment during economic downturns. Earlier in the month, Bloomberg News reported that Wall Street firms are sounding the alarm for a recession in 2023. BlackRock’s Investment Institute stated that “a recession is foretold,” while Barclays is predicting “one of the weakest years for the world economy in 40 years.” This also comes after multiple Fed officials have predicted interest rates remain elevated for the foreseeable future. Federal Reserve Bank of San Francisco President Mary Daly said in a streamed interview with the Wall Street Journal a couple of weeks ago that “I think something above 5[.0%] is absolutely, in my judgment, going to be likely.” Her comments come a week after Minneapolis Fed President Neel Kashkari stated that the “central bank’s so-called terminal rate could reach as high as 5.4% before easing,” in a post on Medium.


Finsum:As Wall Street firms sound the alarm on a potential recession, investors are flocking to fixed-income ETFs, which are seen as safer investments during economic downturns.

New Age Alpha, which provides equity and fixed-income advisory and sub-advisory services, recently announced the launch of its new direct and custom indexing platform, SPACE. SPACE, which stands for Systematic Personal Asset Customization Engine, is designed to allow the user to build and trade customized alpha or beta index strategies. While SPACE comes with the typical benefits of other direct indexing platforms such as tax optimization, transparency, and ESG screening, it also includes additional features unique to New Age Alpha. For instance, users can build an alpha index strategy by customizing the underlying holdings of an ETF and utilizing factor screens across growth, value, and New Age Alpha's proprietary "Expectation Risk Factor." SPACE offers three primary applications, direct indexing, custom indexing, and prebuilt strategies. The direct indexing application provides the ability to invest directly in the underlying components of well-known indexes and ETFs through an SMA, allowing maximum tax optimization. The custom indexing application provides the ability to build custom, thoughtfully aligned alpha or beta indexes through personalization across various filters, screens, and factors to meet your client's specific needs. The prebuilt strategies offer the ability to invest using any of the over 120 indexes using New Age Alpha’s proprietary Expectation Risk Factor methodology.


Finsum: Asset management firm New Age Alpha launched SPACE, a new direct and custom indexing platform that offers unique features such as the ability to build an alpha index strategy with the firm’s proprietary "Expectation Risk Factor."

Wednesday, 25 January 2023 12:29

KKR Latest to Limit REIT Withdrawals

KKR has become the latest non-traded REIT to limit redemptions. The company revealed in a regulatory filing this week that investors sought to withdraw more than 8% of KKR Real Estate Select Trust’s (KREST) $1.6B in assets during the past three months. KKR said the KREST redemption requests far exceeded its 5% quarterly limit in the past three months. Barron’s reported that the company wrote in its filing that the REIT limited withdrawals to 62% of requests. This follows news last month that the Blackstone Real Estate Income Trust (BREIT) and the Starwood Real Estate Income Trust (SREIT) limited withdrawals after quarterly and monthly redemption limits were breached. Investors have been running for the exits at non-traded REITs, triggering withdrawal limits the REITs use to prevent them from having to make forced sales. The non-traded REITs say they need redemption caps to protect investors because their corporate real estate (CRE) assets typically have limited liquidity. In the regulatory filing, KREST CEO Billy Butcher said “Within KREST, we are balancing providing access to private real estate, which is an illiquid asset class, with the recognition and understanding that regular liquidity is an important feature for KREST shareholders.”


Finsum:KKR becomes the latest non-traded REIT to limit redemption requests to maintain liquidity.

Wednesday, 25 January 2023 12:28

JPMorgan Lures $400 Million Team from Merrill

JPMorgan recently announced that they nabbed a $400 million team of financial advisors from Merrill Lynch. According to a press release announcing the move, The Karstaedt Group, which includes wealth advisors Marc Karstaedt, Daniel Zomback, and Raymond Lin and Client Associate Parker Jaques, joins JPMorgan Advisors in New York. JPMorgan says the team will report to regional director Keith Henry. Marc Karstaedt started his career in 1992 with Lehman Brothers and had stints at Citigroup and Morgan Stanley before joining Merrill in 2016. Zomback started in 2018 with AXA Advisors before joining Merrill in 2020. Lin began his career at Merrill in 2021. Merrill also lost an associate market manager to JPMorgan last month, when she left to oversee JPMorgan’s advisors in New York and New Jersey. However, Merrill 2022 had the “strongest year” in more than a decade in terms of hiring. Merrill Wealth Management’s president, Andy Sieg, said in a Q&A session following the firm’s quarterly earnings release two weeks ago, that the global wealth management and consumer-banking division ended the year with 19,273 advisors across its various channels. This was 2.3% higher than last year. Brian Moynihan, chief executive officer of Bank of America, Merrill’s parent company, also said last month that the firm plans to continue hiring financial advisors and private bankers, while JPMorgan CEO Jamie Dimon said earlier this month that his firm is “still in hiring mode.”


Finsum:With JPMorgan still in hiring mode, the firm scooped up a $400 million team from Merrill Lynch, which is also continuing to hire advisors.

Wednesday, 25 January 2023 12:04

How Should Advisors Approach Bonds in 2023?

While bonds are generally known for their stability, 2022 marked a deviance from the norm. The question for advisors is, how should they approach 2023? Mariam Kamshad, head of portfolio strategy for Goldman Sachs personal financial management, and Guido Petrelli, CEO, and founder of Merlin Investor spoke to SmartAsset to provide some guidance. First advisors should expect a return to the norm. Kamshad said 2022 was an unusually bad environment for bonds with the Federal Reserve raising rates to a 15-year high. She believes that's unlikely to repeat and expects both yields and capital gains returns to stabilize. Second, advisors should pay attention to inflation and government bonds. Kamshad believes that inflation is still the biggest issue in the economy and expects it to continue slowing in 2023, which would likely slow interest rates. Her team considers duration risk a better bet than credit risk. Kamshad's team also recommends investors consider government bonds. The team expects intermediate Treasurys to outperform cash. They also expect municipal bonds to pick back up. Petrelli recommends following the unemployment rate and the quit rate as they are “good metrics for the strength of the economy overall and a window into where bonds are headed.” He believes a potential recession is one of the biggest questions facing the bond market. In a recession, Petrelli expects investors to favor short-term bonds.


Finsum:According to two portfolio analysts, advisors should expect a return to the norm for bonds, but they should also keep an eye on inflation, government bonds, and the jobs report.

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