Displaying items by tag: etf

The bond market has given investors pause, and the international bond market especially so. While continuing Covid-19, international war, and rising rates may scare investors, international bonds still add enough diversification to justify their place in the portfolio. Investors are more worried about inflation/interest rates now than Ukraine and Russia, and that risk is heightened domestically. As the Fed hikes rates, yields will rise and hurt domestic bond and equity portfolios. The Euro area has significantly less interest and inflation risk in the near term. Additionally, the deglobalization of covid is slowly going away, and as markets open up that will only improve the position of international bonds.

Finsum: ETFs with large exposure are best in international markets because tensions surrounding global issues are heightened right now. 

Everyone and their dog has been pivoting to ultra-short duration pseudo-cash bond ETFs in the fixed income balance of their portfolio and this is causing a sell-off of lots of corporate bond ETFs. LQD saw its fifth day of outflows which set a pandemic era record. This brought together a total of $856 million in investor outflows. This is part of a blogger trend where sentiment around investment-grade bonds is weakening. However, it's not because they are less likely to pay back but more a reflection of investment-grade corporate debt generally having a longer duration, which is the risk investors don’t want with upcoming rate hikes.

Finsum: The risk premium hasn’t changed with corporate debt just the term structure risk. Fundamentally these bonds could still be in a good place.

(New York)

Thematic ETFs have been one of the market’s bright spots over the last couple of years. For evidence of this…Read the full story here on our partner Magnifi’s site.

(New York)

It has been a decade in the making, but it finally, unceremoniously, happened. The AUM in passive investment vehicles, like ETFs, has finally overtaken that in actively managed ones, like mutual funds. As of August 31, money in passive funds totaled $4.27 tn, just a touch higher than the $4.25 tn in actively-managed funds. In a good summary of the overall change in landscape, the Wall Street Journal says “That shift lowered the price of investing for individuals, reduced the influence of stock pickers and turned a handful of Wall Street outsiders into the biggest power brokers in the industry”.

FINSUM: Every advisor reading this column knows exactly why this happened, but it is nonetheless a landmark moment. It is also perhaps a warning sign—which side is driving the market?

(New York)

One of the weakest sectors over the last year has been asset management. If you take a close look at some top asset managers, including Invesco, BlackRock, etc, you will see that many are down 20% or more. The growth of passives, pressure on fees, and weak inflows have all combined to bring down the managers. According to Barron’s they look like big bargains. BlackRock, T.Rowe, Franklin Resources, and Legg Mason look like the good bets. There are some great payers in the group too, with Invesco and BlackRock both sporting yields over 4% and AllianceBernstein paying a whopping 8.6%.

FINSUM: Yes, the industry’s traditional model is under fire, but those with very good scale will win out. Therefore, we do think the very top managers are a good buy, especially at these valuations/yields.