Wealth Management

In an article for InvestmentNews, Bruce Kelley discussed some of the collateral effects of First Republic’s troubles. Since these issues began in early March, around a third of the company’s advisors in its wealth management division have left the firm.

Following JPMorgan’s takeover of the bank, filing show that 150 advisors remain at the firm, while there were around 230 at the beginning of the year with about $271 billion in total assets. According to JPMorgan, many of the 150 advisors intend to stay on and transition to JPMorgan’s wealth management division. 

The bank also revealed that it plans to honor any recruiting deals that were struck by First Republic. Notably, First Republic had been quite aggressive in recruiting clients from banks and smaller firms. Ironically, it had recruited about 40 advisors from JPMorgan since 2010. 

JPMorgan’s acquisition should stem the tide of advisors leaving First Republic. In April, a team of First Republic advisors, managing $10.8 billion in assets, departed for Morgan Stanley. Prior to this, another team, which managed $2.3 billion in assets,  was picked off by Rockefeller Global Family Office.

Finsum: One of the consequences of the failure of First Republic bank is that many advisors are leaving for greener pastures. But, the JPMorgan acquisition may put a stop to this.

In an article for IFAMagazine, Meg Brantley discusses how active fixed income ETFs staged a turnaround in early March. The asset class was moving lower as it seemed that the economy would continue growing at a rapid clip, adding further fuel to inflation.  However, there was a negative shock to the economy as Silicon Valley Bank and Credit Suisse had to be rescued. In turn, risks to the financial system climbed, and there was a stunning turnaround for fixed income. The 2-year Treasury note dropped 119 basis points in three days which was the largest drop since 1987. 

For financial markets, it was a major sea-change, and it seems to have marked the bottom in bonds which have been steadily trending higher. Odds of a recession and rate cuts in the first half of 2024 also climbed higher which further contributed to strength in fixed income. 

These events have contributed to volatility but also led to opportunity for active fixed-income managers. The forces of a hawkish Fed and raging inflation which dominated 2022 created a negative backdrop for fixed income. Now, the macro backdrop for fixed income has gotten more constructive especially with inflation and rates trending in the right direction. 

Finsum: In March, the landscape for active fixed income shifted dramatically. Looking forward, the asset class is offering some compelling opportunities. 

In an article for ETFTrends, Ben Hernandez gave some reasons why there is still opportunity for fixed income investors in high-quality bonds, and some ETFs to consider. 2023 has seen a strong rebound for bonds after an abysmal 2022. 

The major factor is that inflation expectations have turned lower, while many see an endpoint to the Fed’s hikes later this year. Additionally, increasing odds of a recession have also resulted in inflows into fixed income ETFs. 

While the Fed is expected to hike one or two more times, this headwind is more than offset by slower economic growth and increasing risk of a credit crunch given the inverted yield curve and damage to the banking system. Another positive for fixed income ETFs is that yields are at their highest level in decades. 

Fixed income investors can take advantage of this favorable backdrop by investing in a  high-quality, short-duration ETFs. One example is the Total Bond Market ETF, which is composed of a variety of government, corporate, mortgage-backed securities, and international bonds. Another option is the Vanguard Short-Term Inflation-Protected Securities Index Fund. This is comprised of short-term, inflation-protected Treasury bonds. 

Finsum: 2023 has featured a strong rebound for fixed income ETFs. The major factors are a slowing economy, ending of the hiking cycle, and cooling inflation.


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