According to survey findings published by Natixis Investment Managers, fund selectors are enhancing their model portfolio offerings. Natixis surveyed 174 investment professionals in North America who are responsible for their firms’ top-of-the-house selection of funds into which $18.7 trillion in client assets are invested among private banks, wirehouses, registered investment advisors, independent wealth managers, and other advisory firms. The findings are part of a larger global survey of 441 professional fund selectors, which was conducted in December 2022. Based on the survey results, fund selectors are enhancing their offerings because model portfolios help to streamline the investment management process (86%), enable advisors to spend more time addressing client needs (82%), and help to ensure a consistent investment experience for clients (77%) while managing risk exposure for the firm (78%). They also agree that heightened market volatility is accelerating advisors’ use of model portfolios (65%), while models enhance the alpha potential for their clients (62%). The survey also found that 58% of fund selectors are finding a greater need for specialty models to complement the core models that advisors use for building client portfolios. The types of specialty models include models with enhanced customization tailored to high-net-worth clients (46%), models with a focus on alternatives (42%), income generation (43%), tax management (38%); sustainability (34%), and thematics (28%).

Finsum:Based on the results of a Natixis survey, fund selectors are enhancing their model portfolio offerings to help to streamline the investment management process, and enable advisors to spend more time addressing client needs, while managing risk exposure for the firm (78%).

With ESG investors pressuring companies to transition to sustainable businesses, BP’s chief executive Bernard Looney is warning that the energy transition needs to happen in an orderly fashion or else oil and gas prices will spike if supply is cut too quickly without a drop in demand. Looney stated the following at the recent International Energy Week event in London, "Reducing supply without also reducing demand inevitably leads to price spikes – price spikes, leads to economic volatility." He added that we need, “Affordable energy flowing where and when it's needed... Investing in energy security and the energy transition. This is Looney’s second warning for the need for an "orderly transition.” In early February, he stressed "an orderly" transition when he announced that BP would be producing more oil and gas for longer, and now aims for a fall of 20% to 30% in emissions from the carbon in its oil and gas production in 2030 compared to a 2019 baseline, lower than the previous aim of 35-40%. At the London event, he also noted that “People today want an energy system that works. That provides secure, affordable, and low-carbon energy - what the Energy Institute calls the triple energy crisis."

Finsum:At a recent energy event in London, BP CEO Bernard Looney warned for the second time that the energy transition needs to happen in an orderly fashion or else oil and gas prices will spike.

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.

Several fund firms are looking to expand their fixed-income product lines to take advantage of the growing interest in the asset class. Fixed income had experienced a couple of turbulent years as the Federal Reserve's rate increases impacted yields and made equities more volatile. Plus, actively managed fixed-income mutual funds experienced one of their worst years on record in terms of outflows. However, the demand for fixed income this year appears to be gaining steam with several firms positioning themselves to take advantage of this trend. For instance, BlackRock has been rolling out new products to meet fixed-income demand. In January, the firm launched the BlackRock AAA CLO ETF, which has already taken in more than $30 million in assets as of Feb. 21st. Plus, last year, BlackRock launched a first-of-its-kind series of fixed-income ETFs that are designed to provide access to buy-write investment strategies on baskets of fixed-income securities. According to Steve Laipply, U.S. head of iShares Fixed Income at BlackRock, “The theme here is building out different tools for investors to navigate the environment so you continue to see this floating rate theme across the credit spectrum.” The firm is eyeing additional products in the future. Laipply also added that the industry will begin to get more creative when it comes to rolling out new products in the fixed-income space.

Finsum:After a couple of turbulent years, fixed-income funds are seeing increased demand, leading fund firms to take advantage of the trend by launching new products.

While housing prices have recently fallen, don’t expect a market crash like in 2008. That is according to Jack Macdowell, co-founder, and chief investment officer at alternative asset manager Palisades Group. In a January note, Goldman Sachs strategists predicted that national home prices would fall by at least 10% peak-to-trough this year, but Macdowell disagrees. He stated, "People may be concerned that we're entering into another global financial crisis-type event, where we'll see a ton of distressed inventory on the market putting downward pressure on home values. I would argue that I don't think that's the case." To back up his point, Macdowell noted that today's lenders have become smarter about loan origination than they were in the past, which helps mitigate overall default risk in the market. He also said that the ratio of mortgage debt service payments versus disposable income is currently at historically low levels, versus its peak in 2007. According to him, both of these factors lead to the unlikeliness of a "2008-esque housing" crash. In addition, Macdowell points out that in comparison to historical levels, current mortgage rates are still considered to be fairly low and while demand has fallen across the nation, Macdowell believes a low housing supply is a reason to buy the dip in existing homes sales.

Finsum:Real estate CIO Jack Macdowell doesn’t expect a 2008-style housing crash as lenders have become much smarter about loan origination and the ratio of mortgage debt service payments versus disposable income is at historically low levels. 

Investors are bracing for more market volatility as traders buy up hedges at the fastest clip since the start of the Covid-19 pandemic. According to Cboe data, call options betting that the Cboe Volatility Index (VIX) will rise are the highest on an average day in February than at any time since March 2020. After not much movement for months, the VIX, which is also known as Wall Street’s fear gauge, rose above 23 last week, its highest level since the first few trading days of the year. Readings below 20 usually signify complacency, while readings above 30 signal investors are looking for protection. The increased demand is due to two reasons. First, when stocks rebounded at the start of the year, investors jumped back into the market, restoring a need to hedge their portfolios. In addition, recent economic data increased the likelihood that the Fed will be forced to continue raising interest rates to slow inflation, stalling the stock rally. The S&P 500 saw three consecutive weeks of declines, which was capped by a hotter-than-expected reading on the personal consumption expenditures price index, the Fed’s preferred gauge of inflation. The CME Group Volatility Index, which tracks volatility in the Treasury market, also recently reached its highest levels in more than a month.

Finsum:Investors are bracing for more volatility in the market as call options betting that the VIX will rise are at their highest mark since the start of the COVID pandemic.

Financial advisors? The bulk of them have the horizon over their shoulder. Nice setting, but you get the drift. Over the next decade, reported advisorperspectves.com last year, about one third of advisors will call it a day. While that’s not exactly raise red flags, what does stand out is that no one’s stepping into their shoes.

The load down: On average, each year, 30,000 people sat for the series 7 examination to become a financial advisor. Now, not is it only closer to 5,000, most applicants are taking it with an eye not on becoming financial advisors, but registered assistants. You read that right.

You don’t need Wikipedia to get the meaning: among clients of advisors who lack a formal succession plan in place, the best clients can do is gird themselves to restart with a new advisor. Problem is, that advisor knows neither them or their goals. Double whammy.

That said, last year, Avantax announced 66 recruits in the fourth quarter, according to thinkadvisor.com.

The company was a regular magnet for the year, attracting 258 recruits, Todd Mackay, president of Avantax Wealth Management, the firm’s independent broker-dealer division, stated.

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.

According to a recent announcement, Sanctuary Wealth lured a team with $1.5 billion in assets away from Merrill Lynch Wealth Management in The Woodlands, Texas outside Houston. According to Sanctuary, the seven-person group, which generated about $11 million in annual revenue, is the largest group by assets to join Sanctuary since its 2018 launch. The Merrill team is led by brothers Brent R. and Bradley C. Chappell who inherited the practice from their father, Robert D. Chappell, who retired from Merrill Lynch in 2019. The Chappells have known Sanctuary President Vince Fertitta “for many years” from his days working as a divisional manager at Merrill in Texas before his joining Sanctuary in 2019. Brent Chappell started on his father’s team in 2003 after graduating from the University of Texas at Austin, and Brad joined three years later after graduating from the same school. The group also includes advisors Michael Mills and Spencer Carlson as well as support staff Chel Larkin, Jaymie Wendt, and Brianna Warren. As part of the announcement, Brad Chappell said the following, “By partnering with Sanctuary, we see real opportunities to grow our business that weren’t available to us previously and wouldn’t exist in a lateral move to another wirehouse.”

Finsum:A seven-person team with $1.5 billion in assets jumped from Merrill Lynch to Sanctuary Wealth due to opportunities to grow the business that weren’t previously available to them.

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.