Capital Group, the parent company of American Funds, recently launched 12 active-passive model portfolios featuring Capital Group as the strategist. The models will be made up of American Funds' actively managed mutual funds and passively-managed ETFs from Vanguard, Schwab, and BlackRock. As the strategist, Capital Group will select the passive ETFs in each model and manage the allocations. The models are the latest in a series of active-passive model portfolios from Capital Group that include growth, growth and income, preservation and income, and retirement income strategies. They are designed to help advisors balance the demands of investment management with the need to scale their businesses and deepen client relationships. Capital Group's model portfolio business is an area of strategic focus for the firm. Its model portfolio business has more than tripled in assets under management since 2018. The new models bring the total number of model portfolios available nationally to 31. The new models comprise nine core models and three retirement-income-focused models. They include:

• Capital Group Active-Passive Global Growth Model
• Capital Group Active-Passive Growth Model
• Capital Group Active-Passive Moderate Growth Model
• Capital Group Active-Passive Growth and Income Model
• Capital Group Active-Passive Moderate Growth and Income Model
• Capital Group Active-Passive Conservative Growth and Income Model
• Capital Group Active-Passive Conservative Income and Growth Model
• Capital Group Active-Passive Conservative Income Model
• Capital Group Active-Passive Preservation Model
• Capital Group Active-Passive Retirement Income Model - Enhanced
• Capital Group Active-Passive Retirement Income Model - Moderate
• Capital Group Active-Passive Retirement Income Model - Conservative

Finsum:Capital Group added to its series of active-passive models with the launch of 12 new model portfolios, including nine core models and three retirement-income-focused models.

Direct indexing was one of the hottest topics in the financial services industry last year. The strategy has typically only been utilized by wealthy clients with complex portfolios, but that’s a mistake, according to Randy Bullard, global head of wealth at Charles River Development. Bullard, who was presenting along with Ben Hammer, a sales executive at Vanguard, at the ETF Exchange conference, pushed back on the notion that direct indexing is a niche product for select clients. He stated, “A direct indexing solution is uniquely designed to catch money in transition, and it’s suitable for all types of investors. That’s the transition the industry is starting to go through. Once you conquer the operational complexities of direct indexing, it becomes a broad market solution.” In fact, Hammer believes that it gives “advisors an additional edge with clients.” Hammer added that the volatility of 2022 provided the perfect environment to showcase the strengths of direct indexing. He stated, “Right now, most of the reason people are using direct indexing is for taxes, but we’re telling people not to fall in love with that after-tax return from last year. Volatility created an opportunity last year, but the opportunity hasn’t passed by. Every year there are some stocks that fall in an index.” Hammer is also seeing increasing adoption among accounting firms that work with advisors.

Finsum:While direct indexing has primarily been a tool for the wealthy, two panelists at the ETF Exchange conference believe that all investors can benefit from it, which gives advisors an edge with clients.

After a tough year in the equity markets, this year is shaping up to be a better year for investors as the S&P 500 is up over 7% through Monday’s close. This is happening amid numerous recession predictions across Wall Street. The rise in the stock market this year can be attributed to the growing sentiment that the worst is over when it comes to inflation and rising interest rates. In fact, a gauge of future volatility in the U.S. bond that tracks interest-rate turbulence is now showing an increasingly encouraging trend that is supporting the optimism in the market. The ICE BofA MOVE Index is extending a slide that started in October. It has now fallen to lows not seen since March when the Fed started its aggressive interest-rate increases. The index continued to fall after the Fed’s latest meeting on Wednesday, where according to billionaire investor Jeffrey Gundlach, Fed Chair Jerome Powell “didn't fight back in his speech Wednesday against market expectations that the Fed will soften its rate policy later this year.” The Fed raised benchmark borrowing costs by only 25 basis points, the smallest increase since last March. Over the past year, the trajectory of the S&P 500 has moved inversely to the MOVE index, showing the market's sensitivity to the interest-rate outlook.

Finsum:The stock market has rebounded this year as the ICE BofA MOVE Index, which measures bond volatility, has been sliding since October.

Morgan Stanley recently announced the launch of an exchange-traded fund platform with the listing of six Calvert ETFs on NYSE Arca, including an actively managed fixed-income ETF. The Calvert Ultra-Short Investment Grade ETF (CVSB) will focus on investment-grade debt issuers. Managers Eric Jesionowski and Brian S. Ellis seek to maximize income, to the extent consistent with the preservation of capital, through investment in short-term bonds and income-producing securities. Investors will gain diversified short-term fixed-income exposure to an actively managed portfolio of high-quality bonds of issuers that Calvert believes are demonstrating effective management of key ESG risks and opportunities. The other five ETFs include four indexed ESG equity strategies and an active ESG strategy. The funds include the Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI), the Calvert US Large-Cap Core Responsible Index ETF (CVLC), the Calvert International Responsible Index ETF (CVIE), the Calvert US-Mid Cap Core Responsible Index ETF (CVMC), and the Calvert US Select Equity ETF (CVSE). As part of the announcement, Dan Simkowitz, head of Morgan Stanley Investment Management, said the following in a statement. “This launch is the first step in MSIM’s development of a robust ETF platform that supports products across our businesses, asset classes, jurisdictions, and brands.”

Finsum:Morgan Stanley announced the launch of an ETF platform and the listing of six Calvert ETFs, including an actively managed ultra-short investment grade ETF.

Last month, fixed-income ETFs saw more inflows than equity ETFs. Elisabeth Kashner, director of global fund analytics at FactSet said in a phone interview with MarketWatch that “You don’t see that every day. That’s kind of a big deal.” According to Kashner, fixed-income ETFs brought in around $23.7 billion in January, while equity ETFs raked in a total of $22.9 billion. In 2022, rates rose quickly amid sky-high inflation. Due to this, investors embraced more “targeted products” than broad fixed-income funds, according to Kashner. This continued into January as the Schwab Short-Term U.S. Treasury ETF (SCHO) and the iShares 20+ Year Treasury Bond ETF (TLT0) were among the top 10 funds for inflows. Kashner noted that the Schwab Short-Term U.S. Treasury ETF “is what you buy defensively if you want to be in high-quality” fixed income “but you don’t want too much duration exposure,” due to concern about rising rates. She also said that the “iShares 20+ Year Treasury Bond ETF, which provides duration exposure, tends to attract investors worried about a recession.” Other fixed-income ETFs that saw strong inflows last month include the iShares JP Morgan USD Emerging Markets Bond ETF (EMB) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), according to FactSet data.

Finsum:Fixed-income ETF inflows outpaced equity ETF inflows last month as investors continued to embrace more targeted fixed-income products amid high inflation.