US annuity sales reached $113.5 billion in Q1, 21% higher than last year. It was also the second-highest quarterly figure on record after the fourth quarter of 2023, according to LIMRA. There was solid and impressive growth across nearly every category, and the organization anticipates that sales will remain strong for the rest of the year. 

Bryan Hodgens, the head of LIMRA research, noted, “The remarkable sales trends over the past two years continued into 2024. Favorable economic conditions and rising investor interest in securing guaranteed retirement income have resulted in double-digit sales growth in every product line.” 

Fixed-rate deferred annuities accounted for the biggest share of sales at 42%. This segment generated $48 billion in revenue, a 16% increase from last year. 85% of fixed-rate deferred annuities had durations of less than 5 years. 

Fixed-indexed annuities set a new record in terms of quarterly sales at $29.3 billion, 27% higher than last year. The next highest contributor were income annuities. Among this category, single-premium immediate annuity sales were $4 billion, a 19% increase from last year, and deferred-income annuities were at $1.1 billion, 35% higher than last year. Registered index-linked annuities saw $14.5 billion in sales and continue to be the fastest-growing segment with a 40% growth rate.

Finsum: Annuity sales maintained their hot streak with a new record for Q1 sales and the second-highest quarterly figure. LIMRA attributes this to high interest rates and unease about the economic situation. 

Prudential conducted a survey of 198 financial advisors to gain insight on how they are investing and constructing portfolios for retirees. 80% use separate portfolios that are specifically designed for retirees. Additionally, the use of targeted portfolios was higher among advisors who were more knowledgeable about planning for retirement. 

Another takeaway from the survey is that 50% of retirees prefer to live off of income from their portfolios. Thus, advisors need to ensure that their portfolios generate income for clients while balancing other factors like total return and diversification.

In terms of asset classes for retirement portfolios, advisors favored long-term fixed income, US large-cap stocks, and TIPS. Advisors who were more knowledgeable about retirement planning favored long-term bonds and TIPS to a greater degree than less knowledgeable advisors. 

The survey also showed that most advisors are constructing retirement portfolios themselves or with the assistance of third-party recommendations or allocators. Advisors with less knowledge about the subject were more likely to outsource portfolio construction. 

Most advisors are helping clients plan for retirement by optimizing for goals such as flexibility in spending or timeframe. This is in contrast to other approaches, which include using a bucket strategy or segmenting the portfolio into different strategies for different purposes.

Finsum: Prudential conducted a survey of financial advisors. Those with more knowledge about retirement planning favored long-term bonds and tend to use differentiated strategies.

State Street is bullish on fixed income. It believes that institutions should take advantage of attractive yields and that macro conditions are improving, albeit in an uneven fashion. Investors can achieve their diversification, return, and income goals without compromising on credit quality.

Many pensions have been able to close or shrink their funding gaps due to higher yields from Treasuries and investment-grade corporate debt. At current valuations, bonds are able to more effectively function as a hedge against weaker economic growth and serve as an effective hedge against equities. 

State Street sees the economy in a sideways period for rates and inflation. Therefore, it recommends that investors get long duration and see a more favorable environment eventually emerging for borrowers. It forecasts that inflation and Fed rates will end the year lower, providing a tailwind for fixed income.

In terms of active vs. passive strategies for fixed income, State Street takes a nuanced approach. It believes that in certain sectors, capable active managers have proven to add value. But this alpha has been shown to erode over time.

State Street has built a systematic approach towards fixed income which uses a rules-based approach. It weighs factors like value, sentiment, and momentum. It sees considerable benefits to increased electronic trading for fixed income, which has resulted in more data and liquidity. 

Finsum: State Street is bullish on fixed income due to attractive yields and an improving macro environment. In terms of active vs. passive fixed income, it takes a nuanced view.  

Bonds are generally lagging behind this year, with the Bloomberg U.S. Aggregate Bond Index down by 3% year-to-date as of April 2022. Municipal bonds are similarly affected, with the ICE AMT-Free US National Municipal Index showing a 1% decline since the year's start. However, pockets of strength exist within the municipal bond space, particularly in high-yield offerings like the VanEck High Yield Muni ETF (HYD), which has seen nearly a 1% increase year-to-date. 

Despite the higher risk associated with high-yield bonds, HYD maintains a balanced risk profile, with a significant portion of its portfolio allocated to investment-grade bonds. Offering a 30-day SEC yield of 4.49%, HYD presents an attractive option for investors seeking enhanced yield opportunities, particularly those comfortable with added risk and in higher tax brackets. 

Overall, high-yield munis could serve as a credible alternative to junk corporate bonds, especially considering their relative resilience amid rising interest rates and the potential for enhanced returns compared to traditional municipal bond funds.

Finsum: Munis market is capitalizing on the current environment and investors don’t want to miss out. 

The gigantic win for spot Bitcoin ETFs with the SEC represents a significant milestone in facilitating compliant access to the leading cryptocurrency. Since January 10, inflows exceeding $10 billion have bolstered optimism for Bitcoin and the broader market outlook. For retail investors, these ETFs offer a streamlined pathway to securely backed Bitcoin, simplifying the complexities associated with managing private keys.

As institutions grapple with meeting client demand for digital asset exposure, crypto separately managed accounts (SMAs) have emerged as a complementary investment solution gaining traction among wealth managers, family offices, and registered investment advisors (RIAs). SMAs, a staple in traditional asset classes, allow for direct ownership of underlying assets and provide customizable portfolios tailored to individual client preferences and investment strategies.

 With their ability to offer regulatory compliance, security measures, and tax optimization strategies, SMAs present a compelling option alongside spot Bitcoin ETFs for navigating the evolving landscape of digital asset investments.

Finsum: SMAs are a great pathway to optimize tax structure for investors and get simplicity in a turbulent alternative space like crypto.

Amid ongoing concerns over inflation, the Federal Reserve opted to maintain its key interest rate at its highest level in over a decade, ranging between 5.25% and 5.5%. Despite solid economic expansion and strong job gains, the central bank noted a persistent lack of progress toward its 2% inflation target. Annual inflation rates remained elevated, with the consumer price index registering at 3.5%, driven primarily by surging housing and insurance costs.

Although there is optimism about reaching the 2% inflation goal, economists caution that significant progress is still needed. The Fed's strategy of keeping interest rates elevated to curb inflation has yielded mixed results, with inflation rates plateauing between 3% and 4% after initial declines. Complex factors, including rising costs passed on by insurance companies and varying consumer spending behaviors, contribute to the inflationary pressures beyond the Fed's control.

While concerns about the labor market and future business conditions persist, analysts believe the likelihood of a recession remains low. Fed Chair Jerome Powell emphasized the ongoing uncertainty, indicating a cautious approach to monetary policy adjustments in the near term.

Finsum: Expect rates to hold steadier than markets might expect with this stubborn of inflation. 

Bitcoin faced a nearly 6% downturn on Wednesday, marking its weakest monthly performance since late 2022, as investors divested from cryptocurrencies prior to the Federal Reserve's interest rate decision. The primary cryptocurrency globally witnessed a drop of nearly 16% in April, as investors cashed out gains from a scorching rally that propelled prices above $70,000.

Bitcoin saw a decline of up to 5.6%, hitting its lowest point since late February, hovering at $57,001, while ether saw more modest losses, down 3.6% at $2,857, also reaching its lowest level since February.  Despite being down 22% from March's peak, bitcoin remains up 35% this year and has doubled in value since this time last year, largely due to significant capital inflows into newly established exchange-traded funds since January. 

Crypto-related stocks, including Coinbase, Riot, and Marathon Digital, dipped in U.S. premarket trading, reflecting broader market uncertainties surrounding the Federal Open Market Committee's stance on interest rates.

Finsum: The original link between bitcoin and inflation/interest rates has deteriorated, but regulation will clear up the future for cryptocurrency. 

Active ETFs have been steadily gaining market share from mutual funds, experiencing a consistent 20% growth in assets annually over the past five years, reflecting investors' growing preference for the cost-efficient and adaptable nature of ETFs. During this period, they have expanded their share of the overall ETF market, skyrocketing from 2% to 8.5%, as indicated by Morningstar's recent analysis on actively managed funds.

 Despite their current assets standing just above $600 million amidst the $8.9 trillion U.S. ETF landscape, they are advancing at a faster pace than both the overall market and their passive counterparts. Investors have injected $375 billion into actively managed ETFs in the last five years, while active mutual funds have witnessed a staggering outflow of $1.8 trillion, according to Morningstar's data.

Investors can anticipate continued growth for active ETFs, asserting their burgeoning prominence within the fund industry, fueled by investor demand and their role in alleviating the outflows from active mutual funds.

Finsum: Investors tend to think pickers have their largest advantage in volatility and macro environments, so this trend could continue. 

Real estate investment trusts, known as REITs, are renowned for their attractive dividend yields, as they are legally obligated to distribute 90% of their post-tax earnings to shareholders. However, REITs are highly sensitive to various market factors such as interest rates, inflation, leverage, and regulatory changes, posing liquidity concerns for investors.

While dividend yield is crucial, conservative investors also consider factors like analyst ratings and liquidity when evaluating REITs. The highest-yielding REITs, according to Rick Orford, based on specific criteria, including annual dividend percentage, trading volume, number of analysts, and current analyst ratings are Vici Properties, showcasing notable revenue growth and offering a promising dividend yield of 5.71%. Starwood Property Trust, recognized as the largest commercial mortgage REIT in the US, presents a forward yield of 9.81%, notwithstanding mixed financial performance in 2023. Redwood Trust emerges as a standout contender with the highest forward yield of 11.24% and an optimistic outlook for future earnings growth, bolstered by its diversified investment portfolio.

Finsum: If interest rates have peaked REITs are poised to deliver huge returns in 2024 and 2025.

Rising inflation and heightened borrowing costs are diminishing the appeal of leveraged private-market investments, but despite these challenges, institutional investors in the Asia-Pacific region remain committed to expanding their allocations in private assets, particularly in real estate and private debt, as highlighted in the firm's recent annual report. 

Among the 120 Asia-Pacific-based institutional investors surveyed, 58% anticipate further inflation escalation, while 65% express concerns about elevated borrowing expenses linked to inflation affecting leveraged private-market investments adversely.

However, amid these macroeconomic headwinds, financial institutions in the region remain bullish on private markets and are planning to boost allocations in the short and medium terms, with private debt emerging as a favored asset class.  The survey also indicated a growing trend of institutional investors allocating more than 30% of their portfolios to private markets, with approximately 64% planning to elevate their allocations to private real estate in the medium run.

Finsum: Private real estate could be posed for a comeback as interest rates fall and remote work becomes more sparse.