Wealth Management
Bond markets have been volatile lately, but some multisector bond funds have managed to deliver stronger returns than the broader bond market. These funds diversify across different fixed-income sectors, such as government, corporate, high-yield, and foreign bonds.
Over the past year, the category has returned 5.93%, better than the Morningstar U.S. Core Bond Index’s 5.66%, and it has also outperformed over three- and five-year periods. A screen for the best performers by one-, three-, and five-year results highlighted three actively managed funds: Axonic Strategic Income Fund (AXSIX), DoubleLine Flexible Income Fund (DFFLX), and NYLI MacKay Strategic Bond Fund (MSYEX).
Each has topped peers recently, with returns ranging from about 7% to nearly 8% over the last year.
Finsum: For investors looking to reduce volatility while maintaining competitive returns, these funds show the potential benefits of a multisector approach.
Advisors are broadening portfolios beyond U.S. equities, with many now considering a more balanced fixed income allocation.
Macroeconomic pressures, particularly uncertainty around the Federal Reserve’s next rate move, make diversification across bond sectors especially timely. Regardless of when rates shift, different areas of fixed income are likely to react in varied ways, underscoring the value of spreading exposure.
The American Century Multisector Income ETF (MUSI) offers an example of this approach, combining investment-grade and high-yield bonds, mortgage-backed securities, emerging market debt, and more.
Finsum: Actively managed funds can adjust sector weightings to capitalize on opportunities while reducing reliance on any single bond segment.
Faith-based ETFs remain niche but are expanding, with six launching this year and total assets now around $10 billion. These funds aim to align investments with religious values, though many end up resembling S&P 500 trackers with higher fees.
Currently, there are 46 such ETFs in the U.S., 38 Christian, seven Muslim, and one Jewish, which have attracted about $832 million in inflows year-to-date. Some apply strict screens, like the Inspire 100 ETF (BIBL), which excludes firms tied to abortion, LGBT activism, or gambling, while others, like SPUS, filter out half the S&P 500 for Sharia compliance.
By contrast, funds such as the JLens 500 Jewish Advocacy US ETF (TOV) and the Global X Catholic Values ETF (CATH) closely resemble mainstream products like Vanguard’s VOO, differing mostly in expense ratios.
Finsum: Advisors must weigh whether these products are genuinely value-aligned investments or simply pricier versions of broad index funds.
More...
Emerging-market stocks and currencies fell sharply after strong U.S. economic data reduced expectations for multiple Federal Reserve rate cuts this year. MSCI’s currency benchmark dropped more than 0.3%, marking its largest one-day loss since July, while a similar gauge for equities slipped 0.7%, the steepest decline since late August.
Traders now see a diminished chance of two Fed cuts by year-end, as U.S. growth accelerated and jobless claims fell. Sentiment was further pressured by geopolitical risks, including rising tensions between Russia and NATO and fiscal concerns in countries such as Poland and Indonesia.
The Philippine peso and Indonesian rupiah led declines, while the Polish zloty and Hungarian forint also weakened on regional political and energy disputes.
Finsum: Despite recent setbacks, some strategists still expect emerging-market assets to recover toward year-end on macro tailwinds and favorable seasonality.
From 2021 to 2024, the U.S. saw a record surge in immigration, much of it from people crossing the southern border without visas. Many were released into the country to seek asylum or given temporary protection, and millions entered the labor force.
By mid-2024, tougher policies and more deportations slowed the inflow sharply. Economists say fewer immigrants could mean slower population and job growth, which may weigh on the broader economy.
Studies show immigration tends to boost economic output while having little effect on inflation. Looking ahead, stricter policies could further reduce growth if fewer workers are available, especially if mass deportations are carried out.
Finsum: For now, the lasting impact will depend on whether immigration levels stabilize or continue to decline.
Investors’ demand for tax-efficient investing is fueling rapid growth in separately managed accounts (SMAs), which now top $500 billion in tax-managed assets—up 67% since 2022. Unlike mutual funds or ETFs, SMAs allow investors to directly own securities, enabling personalized tax management such as loss harvesting.
Direct indexing remains the most popular strategy, but providers are expanding into active equity and fixed-income SMAs to capture additional tax alpha. Challenges arise with active managers, since balancing loss harvesting with stock-picking discipline can dilute investment ideas, though new approaches like substitute stock lists aim to resolve that.
Fixed-income SMAs offer fewer opportunities, but rising rates in recent years did create harvesting potential, while model portfolios are also integrating tax-aware transitions to ease client moves without triggering large gains.
Finsum: Overall, tax-managed SMAs are expanding across asset classes and portfolio models, giving advisors more tools to reduce investors’ tax burdens.