Displaying items by tag: investors

Last year was a tough year for bond investors, even pension funds. With the Bloomberg U.S. Aggregate Bond index down 14.6%, funds had to look elsewhere to bolster returns. According to a recent Pensions & Investments survey, a significant portion of defined benefit plans reported smaller bond portfolios as of September 30th, with many dropping more than 20%. For instance, the $430.4 billion California Public Employees' Retirement System (CalPERS) saw its U.S. fixed-income exposure drop 38.3% in the year ending on September 30th to $77.2 billion. In addition, the $288.6 billion California State Teachers' Retirement System saw its domestic bond exposure fall 12.9% in the 12 months ending on September 30th to $41.3 billion. With pension funds not wanting a repeat of 2022, many are turning to active bond strategies. For example, CalPERS is looking toward active management to turn things around. The pension fund's active and passive fixed-income exposure amounted to $77.4 billion and -$206 million as of September 30th, 2022, compared to $91.6 billion and $33.6 billion a year earlier. Arnold Phillips, managing investment director for global fixed income at the pension fund, noted that the current market could provide "opportunities to tactically deploy assets when managed through an active risk governance model," which could help turn performance around.

Finsum:With pension funds seeing their bond exposures plummet last year, many are turning to active fixed-income strategies this year in the hope of turning performance around.

There’s no question that 2022 was a tough year for investors, but even with all the volatility, investors remain confident in their advisor’s abilities. That is according to the results of State Street Global Advisors’ ETF Impact Survey: Advisor Edition. The survey found an overwhelming majority of investors who work with an advisor remaining confident in their insight and guidance. The percentage of U.S. investors indicating they value their financial advisors’ knowledge and guidance even more during uncertain times held steady at 89% compared to June 2022, when it was 91%. In addition, 81% indicate their advisor has helped them remain confident during this period of rising inflation and market volatility, compared to 86% in June. The survey also revealed that investors are listening to their advisors and not requesting panic-induced trades as 57% of U.S. investors plan to keep their money ‘as is’ and stick to their long-term strategy. Brie Williams, head of Practice Management at State Street Global Advisors had this to say about the survey results, “Helping clients remain confident and committed during times of volatility can be a challenge for advisors whose clients may have a kneejerk reaction to abandon their investment strategy if markets get choppy. Our survey found 86% of investors have discussed market volatility with their financial advisor and 83% say their advisor has informed them of how volatility will affect their long-term financial goals.”

Finsum:A recent SSGA survey found investors remain confident in their advisors’ guidance amid heightened market volatility and rising inflation.

Parcl recently announced the launch of the real estate investment platform Parcl Protocol, allowing users to trade the price movements of real estate markets around the world. Its users can now invest in or trade specific geographical markets, which can be used for directional investment and hedging strategies in a traditionally opaque and walled-off asset class. Parcl is a digital real estate protocol built on Solana, a blockchain specifically designed to host decentralized and scalable applications. Through the Parcl Protocol and leveraging data provided by Parcl Labs, Parcl facilitates real estate investment. It provides exposure to cities in the United States such as New York City, Miami, Phoenix, and Los Angeles, while international cities such as Paris, London, and Singapore will be coming later this year. Users can browse global real estate markets, gain detailed insights, and have the opportunity to either buy or short real estate markets based on whether they think the real-world property values will increase or decrease. The platform is also built differently than other real estate platforms such as Yieldstreet, RealT, or Fundrise as it takes a new approach to increase liquidity and improve scale by using derivatives. The derivatives can improve diversification and add stability to a portfolio.

Finsum:Parcl launched the real estate investment platform Parcl Protocol, which allows users to trade the price movements of real estate markets around the world.

Robin Döttling, an assistant professor of finance in the Rotterdam School of Management at Erasmus University in the Netherlands, and Sehoon Kim, an assistant professor at the University of Florida’s Warrington College of Business, authors of a recently published academic study, found that individual investor demand for socially responsible investing “is highly sensitive to income shocks” and economic stress. The professors went through mutual fund flow data and surveyed investors' views of and expectations for sustainable investing. The study focused on the periods immediately before and after the COVID pandemic went global in early 2020. The results show that when times get tough for individual investors, helping to save the planet takes a backseat to selling funds that they believe may lose more during a downturn. When an economic shock results in incomes shrinking, investors become more risk-averse. In the authors’ words, “We start to view the emotional or nonfinancial appeal of ESG investing as ‘costly’ and ‘unsustainable’ if it means forfeiting returns.” However, the study found that demand for ESG investments from institutions such as pension funds remained more robust. Their actions are typically constrained by investment mandates and are often slower to respond to market shocks. In addition, those investors don’t have to face the same kind of pressures that individual investors deal with during COVID lockdowns and job losses.

Finsum:A recently published academic study conducted before and after the COVID pandemic found that individual investors sell ESG investments during economic downturns, while the demand for ESG remains robust among institutional investors.

Category: Wealth Management

Keywords: investors, ESG, covid, mutual funds

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.