Displaying items by tag: portfolio construction

As traditional 60/40 portfolios face challenges from high interest rates, large deficits, and geopolitical uncertainty, BlackRock suggests evolving asset allocations by incorporating alternatives like liquid alts, gold, and bitcoin. Their Target Allocation model portfolios follow a structured process—sourcing, screening, and sizing—to thoughtfully reconfigure bond-heavy portfolios for modern conditions. 

This involves reducing standard bond exposure in favor of bond-like alternative strategies such as market neutral or merger arbitrage, while preserving resilience in recessionary scenarios. 

Screening over 500 liquid alt funds, BlackRock emphasizes operational quality, performance consistency, and true diversification potential before inclusion. Ultimately, portfolio sizing is optimized to align with investor risk profiles, often making alternatives a significant component—up to half of the fixed income portion in balanced portfolios—while adjusting for more conservative or aggressive strategies.

Gold and bitcoin, though more volatile, should be considered for diversification, with gold typically replacing bonds and bitcoin funded from equities.

PortfolioGPT is an AI-powered platform that rapidly constructs diversified investment portfolios tailored to an individual’s financial goals and risk tolerance. It simplifies the traditionally complex portfolio-building process, offering instant, customized solutions for both novice and experienced investors. 

The platform also allows users to analyze and fine-tune their strategies, encouraging smarter, more proactive financial planning. PortfolioGPT exemplifies the growing trend of AI-driven investment platforms that automate portfolio optimization through intelligent algorithms. 

Its rise reflects broader shifts in fintech and wealth management, where personalized, tech-enabled solutions are making sophisticated investment tools more accessible. 

Finsum: As AI continues to evolve, tools like PortfolioGPT are poised to redefine how people approach investing and financial decision-making.

Active ETFs combine professional management with the liquidity and transparency of ETFs, making them powerful tools for portfolio construction. They offer investors access to active security selection and the potential to outperform benchmarks, while still benefiting from intraday trading, tax efficiency, and often lower costs. 

These funds are especially valuable in areas of the market with inefficiencies, where deep research and targeted exposure can improve outcomes. Derivative-income ETFs can enhance portfolio income and stability by generating yield through options, offering an equity-based alternative to fixed income. 

Meanwhile, buffer ETFs help manage downside risk by capping losses (and gains) over set periods, making them useful for preserving capital during volatile markets. 

Finsum: Together, these active ETF strategies provide investors with flexible, diversified, and goal-oriented components for building resilient and adaptive portfolios.

Corporate Insight (CI) has released its latest Asset Management Monitor – Advisor report, analyzing portfolio construction tools from top asset management firms. The report highlights BlackRock and J.P. Morgan as industry leaders, with both earning Excellent ratings for their comprehensive and user-friendly portfolio analysis tools. 

Key features that set these tools apart include flexible input options, advanced data visualizations, and the ability to customize client reports. J.P. Morgan stands out for allowing advisors to integrate investment objectives, a capability the report suggests other firms should adopt. 

Data visualization remains a crucial factor, with 81% of surveyed advisors emphasizing its importance, and firms like Franklin Templeton and Vanguard excelling in this area. Firms can enhance their tools by improving visualization features, integrating investment objectives, and offering more customization for client-facing reports.

Finsum: Visualization is a great way to demonstrate to clients and help them understand the intricacies and information you are presenting. 

The transition away from zero interest rate policy (ZIRP) wasn’t painless, requiring sharp rate hikes and a challenging bear market before monetary conditions began resembling pre-2008 norms. Now, with higher government bond yields, investors have a genuine risk-free income opportunity, prompting a rethinking of portfolio strategies. 

Angelo Kourkafas of Edward Jones suggests that as cash yields dip below bond returns in 2025, bonds are poised to outperform, restoring their historical role in balanced portfolios. 

While trade policy uncertainty could complicate this outlook, he expects Canadian bond yields to stay rangebound, with income rather than price appreciation driving returns. He sees this fixed-income strength complementing a more measured equity rally, with a diversified stock-bond mix offering steadier returns in the year ahead.

Finsum: Oversized cash positions, could become a portfolio drag, especially for conservative investors who could lock in reliable income with bonds.