Drop in the, um, bucket list? The performance of a number of model portfolios that leverage the bucket strategy recently was put under a microscope by Christine Benz, Morningstar’s director of personal finance, according to smartasset.com. While the year’s been unkind to the portfolios given their bottom line’s have taken a hit, nevertheless, they’ve outperformed the traditional 60/40 portfolio. That, of course, is an asset allocation retirees commonly use. Further, they’ve outpaced the S&P 500. Through the first six months of 2022, it was down – and by a considerable margin.

The strategy’s a way to spread your assets across different groups of investments that will be tapped at various points.

“[T]he Bucket system has delivered by keeping the faucets open,” Benz wrote. “Retirees using a Bucket system can draw upon their cash reserves without having to disrupt their long-term investments, which have likely experienced price declines so far this year.”

So, is the bucket list holding up in light of the difficulties of the year’s market performance? That would be a resound yes, as it does what it was designed to, according to Morningstar.com.

"True, all of my Model Bucket Portfolios have lost money this year -- and my guess is that most retiree bucketers are seeing red ink for the whole of their portfolios, too,” said Benz.  (As of late June, a 60% U.S. equity/40% bond portfolio would be down about 16% for the year to date.)

But the Bucket system has delivered by keeping the faucets open: Retirees using a Bucket system can draw upon their cash reserves without having to disrupt their long-term investments, which have likely experienced price declines so far this year.”

COVID was one thing, but what about reconfiguring the economic landscape?

Among treasurers, the escalating significance of ESG related objectives reflected exactly that, according to gfmag.com.

Today, companies are looking at pressure to adopt ESG principles from stakeholders squarely in the eye, the site continued. The consequence of not embracing, defining and delivering on those initiatives? Potentially allowing the competition to slip through its fingers. And that means more than a diminished reputation or the perception of failing to d the right thing. In the face of market volatility, investments and companies with ESG profiles that rock outdo others, studies show more and more.

Meantime, in light of an uptick in interest among investors in ESG topics, regulators have been burning the midnight oil to come up with consistency and transparency surrounding ESG claims, according to acacompliancegroup.com.

A gaggle of firms also are taking a swing at establishing themselves apart from their peers by committing to, for example, climate and sustainability. 

There will be an awareness of the surge in activity related to the FCA on ESG issues among firms with UK operations. Since the Taskforce on Climate-Related Financial Disclosures has come into effect during the past year, the FCA’s created a division to oversee ESG-related issues. It clarified its strategic direction and focus areas for ESG issues.

Tim Rowe, manager in the FCA’s Sustainable Finance Hub, noted that the FCA is laser focused on five “Ts” for its ESG strategy: transparency, trust, tools and transition. 

Providers of ETFs that invest based on principles of environmental, social, and governance (ESG) are facing headwinds from multiple sides. First, they are about to be hit with a batch of new rules from the SEC. Secondly, they have been put directly in the middle of a political battle between those for ESG and those who think it is just woke capitalism. On the SEC front, the agency recently published the results of two consultations. The first was on proposals to change the so-called Names Rule. The SEC wants to strictly define how a fund’s constituent investments should be reflected in its name. The second was on proposals for requirements on ESG disclosures for investment advisers and investment companies. On the political front, Florida passed a resolution in August that bans its pension fund managers from considering ESG with regard to their investing strategies. During the same month, Texas criticized BlackRock and nine European financial groups for boycotting the fossil fuel industry.

Finsum:ESG ETF providers are facing criticism on both the regulatory and political fronts.

At the 2022 PLANADVISER National Conference, which was recently held in Scottsdale, Arizona, three staffers from the SEC provided an in-depth discussion on multiple topics, which included best practices that firms should consider putting in place to avoid any Reg BI issues. According to the SEC staffers, under Reg BI, when making a recommendation to a retail customer, a brokerage professional must act in the best interest of the retail customer at the time the recommendation is made, without placing their own financial or other interests ahead of the retail customer’s interests. Their recommendations included: avoiding compensation thresholds that disproportionately increase compensation through incremental increases in sales, minimizing compensation incentives for employees to favor one type of account over another, eliminating compensation incentives within comparable product lines, and implementing supervisory procedures to monitor recommendations.

Finsum:At a recent conference, three members of the SEC provided a list of recommendations for advisors to implement to avoid running afoul of Reg BI.

While many market strategists have noted the recent failures of the 60/40 model portfolio, one investment manager still sees value in the portfolio model. Quilter Cheviot's investment manager David Henry told the Financial Times that there was still value in 60/40 portfolios despite rising inflation and geopolitical uncertainty. He commented, "But if we look at the historical numbers, maybe the grim reaper should hold onto his horses." Henry looked at quarterly returns for stocks and bonds since 1986 and found that there were nine quarters when the prices of both bonds and stocks fell in tandem and it has only happened once since 1986 in consecutive quarters, the first and second quarters of this year. He stated, "Breakdowns in diversification like we have seen this year, are rare. We then looked at 12-month forward returns for a 60/40 asset allocation following quarters where stocks and bonds fell together and returns were pretty healthy following those quarters.”

Finsum: An investment manager still believes in the 60/40 portfolio model as it is pretty rare for stocks and bonds to fall in tandem.