Investors were offloading ultra-short-term bond ETFs in a hurry ahead of the Fed’s most recent rate hike. The Federal Reserve’s announced its fourth-straight 75 basis-point interest-rate hike on Wednesday. Ultra-short-term bond ETFs, which are considered cash-like, saw some of the largest inflows this year as the Fed raised rates. However, it appears that investors have now had a change of heart. The iShares Short Treasury Bond ETF (SHV), which tracks U.S. Treasury bonds with maturities of one year or less, saw $2.5 billion in outflows on Tuesday in the fund’s largest one-day outflow on record, according to Bloomberg data. SHV wasn’t alone as a host of other ultra-short-duration funds also saw massive withdrawals earlier in the week. The record outflows suggest that traders believe rising Treasury yields may have topped out and they no longer need the safety that short-term bond ETFs provide. They are either open to more risk with longer duration bonds or are preparing for a potential recession.

Finsum:Ultra short-term bond ETFs are seeing massive outflows as traders extend into longer-duration bonds ahead of a potential recession.

F.L.Putnam Investment Management Company recently announced the launch of a new platform that will allow advisors to execute direct investments in alternatives. The platform is designed for registered investment advisors and features proprietary investment manager research on a curated list of hedge funds, private equity, private real estate, private credit, and venture capital from Atrato, F.L.Putnam's consulting practice. Advisors will be able to access the research with +SUBSCRIBE, an alternative investment order management system for non-traditional product transactions. Through +SUBSCRIBE, RIAs will be able to review Atrato's manager due diligence, the manager's data room of fund materials, and execute transactions into a tailored menu of alternative investments. Tom Manning, CEO of F.L.Putnam had this to say about the launch, "As RIAs grow and scale, the need for sophisticated investment advice, tools, and capabilities increases exponentially. With our platform, advisors will have access to a fully customizable, state-of-the-art solution that allows them to research and confidently allocate to alternative investments on behalf of their clients."

Finsum:RIAs can now access manager research and execute direct investments in alternative assets through F.L.Putnam’s new investment platform.

According to its bi-annual Investor Sentiment Report, commercial real estate data platform Lightbox found that real estate investors are increasingly concerned about a potential recession. In fact, 90 percent of the survey respondents were concerned about the potential for an upcoming recession. Survey participants included commercial real estate professionals from brokerage firms, investment firms, and other real estate segments. Approximately one-third of the survey’s respondents said they were “very concerned” about a recession, while 56 percent said they were just “concerned.” Only 10 percent said they were not concerned at all. The survey, which was taken in August and September, also reflected concerns over the impact of rising interest rates, inflation, and supply chain disruption. Looking at the rest of 2022, most respondents were not optimistic about the real estate market, but 42 percent were more optimistic about 2023. In addition, 80 percent of respondents said rising interest rates, high inflation, and other issues have impacted their hiring strategy, while forty percent said they are only hiring for high-priority needs.

Finsum: Based on the results of a recent survey, 90 percent of real estate investors are concerned about the potential for an upcoming recession.

Morningstar recently announced the launch of Direct Indexing. The new offering will draw from industry-leading research, technology, and insights from Morningstar to help deliver greater personalization, automation, and tax efficiency for advisors and their investors. It will utilize many of the firm’s in-house capabilities, including Morningstar's Investment Management, Morningstar Indexes, Morningstar Sustainalytics, and Morningstar Equity Research to create and manage personalized investment strategies. Initially, the direct Indexing portfolios will be made available through the Morningstar Wealth Platform. This is one of the firm's first major product launches from Morningstar Wealth, a new group combining managed portfolios from Morningstar's Investment Management group, portfolio management software Morningstar Offices, investment data aggregator ByAllAccounts, and the individual investor experience across Morningstar.com. Morningstar Wealth is expected to introduce additional functionality and capabilities to advisors and firms in the coming year. According to Morningstar, approximately 61 percent of advisors indicate they are using or are considering using direct indexing.

Finsum:With a majority of advisors using or planning on using direct indexing, Morningstar has launched its own Direct Indexing offering.

Category: Wealth Management

Keywords: direct indexing, advisors, clients, tax efficiency

While hundreds of mutual funds are expected to lose their ESG designations under new EU rules, money continues to flow into these funds. The fund class is called Article 9, which is Europe’s top environmental, social, and governance disclosure designation. Analysts and industry lawyers say a large number of Article 9 funds don’t currently meet the EU’s strict sustainability requirements, with dozens of funds having already lost their Article 9 tag. Hortense Bioy, Morningstar’s global director of sustainability research, said in an email to Bloomberg, “There could be hundreds of Article 9 downgrades in the next six months.” However, the fund class brought almost €13 billion ($13 billion) in inflows last quarter. This brings the total amount over the first nine months of this year to €29 billion, according to Morningstar data. But industry experts don’t know why. Hugo Gallagher, senior policy adviser at the European Sustainable Investment Forum told Bloomberg, “I am somewhat mystified at the continuing inflows. I can only suspect that it’s due to many end-investors not being entirely cognizant of the ambiguities around Article 9.”

Finsum: Billions continue to flow into sustainable funds that are likely going to lose their EU ESG designation and industry experts don’t know why.