Bonds: Total Market
The rapid growth of open-end funds investing in illiquid assets—like real estate, private equity, and credit—has introduced both opportunity and fragility, particularly due to stale pricing risks that can lead to wealth transfers between investors.
Research shows that these funds often experience artificially smooth and lagged returns, which can mislead investors about actual performance and risk, enabling NAV-timing strategies that exploit predictable price movements. Spencer Couts and colleagues developed a more advanced return unsmoothing method to correct for spurious autocorrelation and better measure fund risk and performance, especially in highly illiquid private credit funds.
However, interval and tender-offer funds help manage these risks by limiting capital flows and allowing managers to avoid forced sales or purchases of illiquid assets.
Finsum: Pooling capital through regulated open-end structures with controlled liquidity offers a more stable way to invest in illiquid markets.
Blackstone beat first-quarter profit expectations, with distributable earnings rising 11% to $1.41 billion, or $1.09 per share, fueled by strong private equity and credit business performance. Despite the earnings beat, CEO Stephen Schwarzman cautioned that rising market volatility—driven largely by tariff uncertainty—may slow down asset sales in the near term.
The firm brought in $61.64 billion in inflows, with nearly half directed toward its credit and insurance segment, pushing assets under management to $1.17 trillion. While the private equity division posted a 13% increase in earnings thanks to $6.5 billion in asset sales, the real estate unit remained a drag with a 6% decline in AUM.
Schwarzman emphasized that a swift resolution to tariff disputes is vital to sustaining economic growth, echoing broader recession concerns from the business community. Despite turbulent markets, Blackstone sees potential in deploying its $177 billion in dry powder amid growing investor caution.
Finsum: Some alts will prove more fruitful in the face of tariffs but fund composition will matter greatly in the P/E space.
State Street Global Advisors has launched a new series of target date funds—called the Target Retirement IndexPlus Strategy—that includes a 10% allocation to private markets managed by Apollo.
These funds, structured as collective investment trusts (CITs), pair State Street’s index strategies for public markets with Apollo’s evergreen fund providing exposure to private credit, equity, and real assets. Brendan Curran of State Street likens this evolution to shifting into a new gear in retirement investing, acknowledging the growing significance of private assets in diversified portfolios.
The collaboration follows earlier efforts between State Street and Apollo, including the launch of a private credit ETF. Apollo views this as part of its broader push to tap into the wealth management space and expand access to private investments, aiming to grow its assets in this segment to $150 billion by 2029.
Finsum: The launch reflects a broader trend of asset managers integrating private markets into retirement solutions to meet demand for diversification and improved outcomes.
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Closed-end funds (CEFs) can be valuable additions to a diversified portfolio, offering the potential for capital growth and income through both investment performance and regular distributions.
Unlike open-end mutual funds, CEFs typically provide higher distribution rates, often paid monthly or quarterly, and allow reinvestment that may enhance long-term returns. Their fixed-share structure after IPOs means managers aren’t forced to hold cash for redemptions, allowing for more efficient and fully invested portfolios.
CEFs also give investors exposure to the illiquidity premium by enabling access to less liquid, potentially higher-yielding investments that open-end funds often avoid.
Finsum: Many CEFs may use leverage to try to boost returns, though this adds risk and volatility.
Target-date funds offer a hands-off approach to retirement investing by automatically adjusting asset allocations over time. These funds balance growth and security by shifting from stock-heavy portfolios in early years to safer investments like bonds as retirement nears.
Named for the investor’s target retirement year, these funds simplify decision-making and are commonly found in employer-sponsored 401(k) plans. A key factor in choosing one is its “glide path,” which determines whether asset adjustments stop at retirement or continue for years beyond.
While convenient, investors should compare expense ratios and investment strategies to ensure alignment with their risk tolerance. Three TDF funds to consider are:
- Vanguard Target Retirement 2045 Fund Investor Shares (VTIVX) – Expense Ratio: 0.08%
- Fidelity Freedom Index 2045 Fund Investor Class (FIOFX) – Expense Ratio: 0.12%
- T. Rowe Price Retirement 2045 Fund (TRRKX) – Expense Ratio: 0.62%
Finsum: Despite their “set it and forget it” appeal, periodic reviews help maintain a well-balanced portfolio.
Deeper tax planning integration in wealth management can enhance advisors’ ability to deliver proactive tax strategies that go beyond traditional investment management. Tax planning has become a crucial differentiator in modern wealth management, with more investors seeking advisors who can optimize after-tax returns and long-term financial outcomes.
Strategies like Roth conversions, tax-loss harvesting, and asset location are now essential tools for high-net-worth clients navigating an increasingly complex tax landscape. With concerns about rising tax rates and policy risks, forward-looking tax planning is becoming indispensable for preserving and growing client wealth.
Advisors who incorporate these strategies can build deeper client relationships, attract more assets, and position themselves competitively in an evolving industry.
Finsum: Tax strategies help give advisors an edge when dealing with clients and helping them allocate to efficient portfolios.