Wealth Management
Investors concerned about exchange-traded funds (ETFs) with options overlays limiting returns should consider the benefits these strategies offer. According to Tony Rochte, Morgan Stanley’s global head of ETFs, options serve as a hedge against significant losses, offering downside protection even if upside gains are capped.
This approach encourages investors to re-enter the broad-based equity market, reducing their exposure to fixed-income products. Alison Doyle, Nasdaq’s head of ETP listings, highlighted the growing popularity of active ETFs, with over 75% of all ETF launches in 2023 being active.
Among these, a significant portion included options-embedded strategies, providing additional risk management tools. This trend shows a shift from traditional fixed-income investments to risk assets.
Finsum: With stocks and bonds becoming more correlated, investors should consider outside strategies like overlays to hedge.
Goldman Sachs Asset Management has rolled out the Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF), marking its fifth ETF launch in 2024. This new fund targets high monthly income by investing in U.S. preferred stocks and hybrid securities, which currently offer yields between 6-7%, benefiting from the expected Federal Reserve rate cuts.
This strategy is designed to maximize yield while providing diversification benefits, as preferred stocks typically have lower correlations to core investment-grade fixed income.
Following the fund’s introduction, GPRF has quickly accumulated nearly $20 million in inflows. The launch of GPRF complements Goldman’s ongoing expansion into municipal bond ETFs, adding to the firm’s growing portfolio, which now includes 43 ETFs.
Finsum: ETFs are an interesting way for investors to get exposure to preferred stock.
Wealth managers rely heavily on platforms such as broker/dealers and custodians, with many considering switching due to operational needs or better financial arrangements. Additionally in a new study, a staggering 85% are willing to change for the right opportunity, but most don’t actively plan to make changes by 2025 or 2026, as inertia and the demands of their practices often hold them back.
Successful managers are more likely to switch platforms, driven by the need for enhanced operational support and favorable terms. Factors like financial arrangements, operational quality, and business development support are key in deciding platform affiliation.
Strategic relationships, particularly with centers of influence, are also critical for sourcing ideal clients. Wealth managers must critically assess platforms’ offerings and strategic positioning to ensure they meet their needs.
Finsum: It’s really critical that the broker dealer is offering as many business development opportunities so advisors can succeed.
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A proposed California bill is aiming to tighten oversight of private equity investments in healthcare, requiring these firms to obtain state approval before acquiring medical businesses. This type of regulation would significantly slow down medical and healthcare acquisitions for PE in a crucial state, which could have severe consequences for the industry.
Backed by unions, consumer advocates, and the California Medical Association, the legislation addresses concerns that private equity deals often lead to higher costs, reduced care quality, and decreased access to essential services. However, hospitals and other opponents argue that such regulations could deter much-needed investments.
The bill, while excluding for-profit hospitals, targets a broad range of healthcare entities, reflecting increased scrutiny of private equity’s impact on the sector. Proponents see the measure as crucial for safeguarding patient care, whereas critics warn of potential adverse effects on healthcare funding.
Finsum: There is a lot of money for private equity on the sidelines right now, hopefully regulation doesn’t slow down what could be a huge fall quarter.
While social media can help financial advisors connect with younger clients, expert Diane Delaney emphasizes the importance of creating personalized experiences for them. Delaney, Executive Director of the Private Risk Management Association (PRMA), advocates a three-pronged strategy alongside social media efforts:
- Personalize engagement for each client.
- Use a combination of online and in-person communication.
- Offer options based on individual needs.
Understanding the younger generation’s financial concerns is crucial, as they face unique challenges like student debt and inflation. Delaney suggests using authentic, jargon-free communication and real-life examples to resonate with this generation. Additionally, social media can be a valuable tool for educational content, such as podcasts and short videos, to better reach younger audiences.
Finsum: Leverage technology to personalize both communication and service with clients.
Investors are increasingly drawn to exchange-traded funds (ETFs) for passive income and capital growth, with demand surging recently. By June, European ETFs surpassed $2 trillion in assets under management, with a notable 88% year-on-year increase in funds raised.
Two notable ETFs for passive income are the iShares Euro Dividend UCITS ETF, which offers a 6% yield, and the L&G Quality Equity Dividends ESG Exclusions UK UCITS ETF, with a 4.6% yield. Both funds provide solid dividend income and diversification, though they have their own risks, including economic downturns in their respective regions.
ETFs offer significant advantages, such as risk management through diversification across various assets, including stocks, bonds, and commodities. While individual stocks might yield higher returns, ETFs can still be highly profitable over time.
Finsum: Now might be an important time to diversify to the UK with elections and interest rate volatility shocking U.S. and Asian markets.