Displaying items by tag: active management

Based on Cerulli Associates' research analysis of mutual fund and exchange-traded product trends in January, institutional investors expect to increase allocations to active investment strategies. According to the data, while mutual funds lost $1.9 billion to start 2023, a few asset classes are generating positive inflows. For instance, taxable bond mutual funds added more than $15 billion of inflows during January, while municipal bond mutual funds added $7.7 billion during the month. This bucked the trend in 2022 in which outflows were $148.7 billion. The release from Cerulli stated, “The gap between active and passively managed funds hit new lows in December 2022; however, [the] Cerulli survey [shows], most institutional investors still want a majority of their portfolios to be actively managed. A noteworthy number of institutional investors indicate increasing their allocations to active strategies in equities (28%) and fixed income (20%).” The release also stated that “Although mutual funds closed 2022 on a “sour note,”—having dropped 4.5% in December—they have so far reversed course in 2023, with assets climbing 5.8% to $17.2 trillion.” The report noted that the data was based on a survey administrated in the second quarter of 2022.

Finsum:According to the results of a recent Cerulli Associates report, institutional investors plan to increase allocations to active strategies as taxable bond mutual funds and municipal bond mutual funds saw a combined $22.7 in inflows during January.

The strong demand for bonds this year has led to a windfall for BlackRock’s fixed-income exchange-traded funds. The fund giant has attracted more investor cash since U.S. rates started rising than all of its competitors combined. The inflows to fixed-income funds are being driven by regulatory changes and creative uses by wealth managers and other bond funds. Deborah Fuhr, the founder of the ETFGI consultancy, told FinancialTimes that “There have been significant changes about the way people think about fixed-income ETFs in the past year. We have seen large funds and asset managers put their portfolios in ETFs . . . rather than buying bonds and trying to manage them themselves.” Salim Ramji, BlackRock’s global head of ETF and index investments added, “We’re finding and expanding into all parts of the bond market in multiple different slices . . . Any part of the bond market that can be accessed through an ETF, we’re capturing that.” This includes ETFs such as IBTG, which only holds U.S. Treasury bonds maturing in 2026. Another fund is LQDB, which purely contains BBB-rated corporate bonds. These ETFs allow active fund managers to use them in different ways. For instance, some use a specific slice to tilt their portfolio either to longer or shorter-duration bonds, which depends on their view of the economy. Ramji also noted that BlackRock ETF users include nine of the ten largest active managers and eight of the ten largest U.S. insurance companies.

Finsum:As demand for fixed income increases, Blackrock has created ETFs that track a small slice of the bond market that active managers can use in a variety of ways.

Kestra Investment Management recently announced that it has launched two new model portfolio series, expanding its offerings for advisors and their clients. The new multi-manager strategies follow the team’s first two model portfolio series, launched in June. The first series is the Active Income Series, which is a new addition to Kestra’s core portfolio offerings. The Active Income Portfolio is a diversified, multi-asset portfolio that incorporates actively managed funds. The portfolio is designed to maximize risk-adjusted total returns while providing additional yield and is available in seven different risk profiles. The second series, the Satellite Series, includes three distinct model portfolios designed to be paired with a core portfolio to address nuanced client needs for income and risk management. The first Satellite Series model portfolio is the Multi-Asset Income Portfolio, which aims to generate higher income than the broad U.S. bond market through a diversified mix of fixed income, equity, and nontraditional assets and strategies such as equity derivatives. The next portfolio, the Tax-Aware Income Portfolio is a diversified fixed-income portfolio designed to generate higher after-tax income than the broad U.S. bond market through a focus on tax-exempt bonds. The third portfolio, the Liquid Alternatives Portfolio aims to diversify sources of risk and return beyond long-only equity and fixed-income exposure by combining a mix of low- and high-volatility alternative strategies that can invest opportunistically in changing market conditions.

Finsum: Kestra expanded its model portfolio offering with two new model portfolio series, including the core Active Income Series and the Satellite Series.

With clients pulling an estimated $130 billion in assets from Janus Henderson since 2017, the fund firm’s new boss is looking to revive the company by leaning into active management and pushing into alternative investments such as hedge funds and private credit. Ali Dibadj, who took over as CEO in June, acknowledged the firm’s difficulties and laid out a turnaround strategy, which includes pushing into some of the most competitive areas of the market to stop the bleeding. A committee of 40 senior staff members met for months to understand what clients want and then created a revival strategy. At the root of the plan is a bet on active management. The firm believes that active management can bring the best returns to investors. In addition to active funds, Janus is looking to focus on liquid alternatives, for which it currently has $20 billion under management. While the division hasn't received much attention, it houses several hedge funds. Last year, the unit had net inflows of $2 billion into products including multi-strategy hedge funds and equity- and commodity-enhanced index funds. Dibadj is also looking into illiquid alternatives. The firm is considering using private credit to augment its fixed-income unit and products tied to mortgage-backed and high-yield securities. Dibadj said the “move stems from client demand for such products.”

Finsum:After seeing $130 billion pulled from its funds, new Janus Henderson CEO Ali Dibadj is looking to stem the bleeding by betting on active management and moving into alternatives such as liquid alternatives and private credit.

Fidelity Investments recently announced it was adding to its active fixed-income strategies lineup with the launch of the Fidelity Municipal Core Plus Bond Fund (FMBAX). According to Fidelity, FMBAX is available commission-free and with no investment minimum to individual investors and financial advisors through Fidelity’s online brokerage platforms. The fund has a 0.37% net expense ratio and a 1.28% gross expense ratio. FMBAX is measured against the Bloomberg Municipal Bond Index and the Fidelity Municipal Core Plus Bond Composite Index, and aims to provide a high current yield exempt from federal income taxes, and may also consider capital growth. Co-managers Cormac Cullen, Michael Maka, and Elizah McLaughlin will analyze the credit quality of the issuer, security-specific features, current and potential future valuation, and trading opportunities to select investments. The fund launch comes at a time when the retail and institutional demand for higher-yielding municipal bond funds is growing. According to the fund giant, this new product seeks to offer a strong yield and total return profile, with potentially lower volatility than pure high-yield funds. Jamie Pagliocco, Fidelity’s fixed income head has this to say about the fund launch, “Fidelity’s growing suite of active fixed income investment products leverage Fidelity’s breadth and depth of resources and expertise as an active manager to identify investment opportunities across the credit spectrum.”

Finsum:Fidelity Investments launched an active municipal bond mutual fund amid increased retail and institutional demand for higher-yielding municipal bond funds.