Displaying items by tag: portfolio management

As market volatility persists, major equity indexes hit new highs, prompting investors to shift from AI and technology stocks to small-caps. The Dow Jones rose 700 points on July 16, achieving a record high, while the S&P 500 followed suit, driven by interest rate cut hopes. 

Natixis Investment Managers advises using selective, active strategies and high-conviction portfolio construction to navigate market peaks. They recommend not waiting for stock declines, as equity markets historically increase 70% of the time. 

For an offensive strategy, focus on growth-oriented, small, and midcap stocks. Active management and model portfolios can help manage risks and optimize tax implications.

Finsum: Prepping your portfolio for the fall election is more crucial than ever. 

WisdomTree Inc. has launched Portfolio Solutions to help advisors create and manage client portfolios efficiently. With $109 billion in assets under management, WisdomTree offers three distinct services: portfolio consultations for advisor-built portfolios, CIO-managed model portfolios, and a shared CIO service for collaborative portfolio management. 

These services aim to streamline asset allocation, save time, and enhance advisor-client communication. Thomas Skrobe, head of product solutions at WisdomTree, emphasized the growth opportunities these services provide for advisors. 

The firm has seen significant adoption, with 2,000 U.S. advisors using WisdomTree managed models and aims to add 1,000 more by the end of the year.

Finsum: The new technology is abundant for portfolio construction, and advisors can lean on the analytics they provide to garner deeper insight. 

What is the best way to manage a portfolio in an era with less structural disinflation, and how can you improve upon the 60/40 in the current environment 

 The traditional 60/40 portfolio, consisting of 60% stocks and 40% bonds, has long been a benchmark, balancing growth from stocks with stability from bonds. However, the historical success of this model relies on a period of declining interest rates and favorable economic conditions in the U.S., which may not persist in the future. 

As interest rates stop declining and inflation potentially rises, the performance of the 60/40 portfolio is expected to be less impressive, especially during high inflation periods when energy and commodities tend to outperform. To better manage portfolios in this new environment, it’s advisable to diversify beyond the 60/40 mix by including assets like commodities, real estate, and cash equivalents to hedge against inflation and provide more stability during economic shifts.

Finsum: We have seen an increased correlation between stocks and bonds in the most recent years suggesting alternative diversification to manage volatility. 

A portfolio’s outcome is driven by a variety of factors on factors like commissions, time horizon, and asset classes, with strategy being a key determinant shaped by each manager’s risk tolerance. While a more risk averse 60/40 strategy, allocating 60% to equities and 40% to fixed income, balances growth and stability, there are other ways to achieve those outcomes in a simplified manor. 

Structured notes, which combine various asset classes into one security, offer a way to achieve this allocation without multiple subscriptions, all while potentially reducing fees. But additionally structured notes offer flexibility, and actively managed notes can adjust based on market conditions, providing regular NAV updates. 

However, structured notes carry risks such as limited liquidity, market risk, and default risk, which can impact their performance and investor returns. Mitigating these risks can provide a competitive advantage in the market.

Finsum: The world of structured notes is vast, but they do offer the ability to simplify portions of an investment strategy and manage moving parts easier. 

Unified managed accounts (UMAs) are professionally managed accounts that allow for the use of multiple investment strategies. This makes it a more comprehensive approach than a separately managed account (SMA) which is typically used for a single, targeted strategy. 

As of the end of last year, UMAs accounted for 26% of assets in managed accounts. Growth in UMAs is due to multiple factors; however, two recent factors are improved pricing and an increase in the number of investment options. 

With UMAs, different strategies can be used to construct a customized client portfolio that leverages the best strategies across different asset classes and investment managers. This allows advisors to optimize portfolios by blending various strategies and selecting managers with the proper expertise. 

This means that an advisor could use different managers for different asset classes, such as domestic equities, foreign stocks, and fixed income. UMAs can also allow for more granularity, such as having one manager for a core equity position and another for dividend stocks. 

UMAs also provide a comprehensive view of a client's finances, which means that rebalancing strategies are more effective, and there is more potential for personalization. This includes the ability to add custom models to a portfolio along with third-party ones. 

Finsum: Unified managed accounts are experiencing rapid growth and provide advisors with a more holistic and comprehensive view of a client's finances.