Wealth Management
Recent research from FTSE Russell reveals that direct indexing is on the verge of rapid growth among U.S. investment advisors. Currently, only 21% of advisors are using direct indexing, but nearly half plan to adopt it in the next 1 to 5 years.
This method enables advisors to craft highly personalized portfolios for clients, addressing both tax efficiency and the need for customization. Direct indexing is particularly valuable in managing concentration risk, especially in large-cap equities, where certain companies dominate traditional indexes.
With the rise of fractional share ownership, building tailored portfolios has become more accessible for investors with smaller amounts of capital. As the benefits of direct indexing—such as tax advantages and diversification—become more widely known, its adoption among advisors is expected to accelerate.
Finsum: The expanding technology and investment solutions in this space position direct indexing to become a key tool for advisors seeking innovative ways to serve their clients.
Oil prices dropped over 2% earlier this week, erasing last week's gains as OPEC revised down its 2024 and 2025 global demand forecasts. China's crude oil imports have now declined for the fifth consecutive month, further weighing on prices.
Despite China's efforts at economic stimulus, investors remain unconvinced, adding to concerns over demand. Brent crude fell by $1.72 to $77.34 per barrel, while U.S. West Texas Intermediate dropped to $73.82.
OPEC attributed much of the demand reduction to China's sluggish economic growth and rising electric vehicle adoption. Geopolitical tensions between Israel and Iran also linger as potential risks to oil markets.
Finsum: Oil price declines and yet inflation still remains slightly elevated, investors should monitor this trend in case inflation takes off again.
With a contentious U.S. election on the horizon, investors are bracing for potential market turbulence, but opportunities within the bond market are emerging. Fixed income, particularly municipal bonds, is poised for strong returns as real interest rates remain historically high, offering attractive yields.
Municipal bond issuances have surged this year, driven by the need for infrastructure funding, creating a favorable entry point for investors. As demand increases and supply decreases later in the year, prices may rise, especially for long-term bonds.
Municipal bonds also present compelling value due to their strong credit profiles and tax advantages, offering stability in uncertain times.
Finsum: Muni bonds provide an excellent option for tax-sensitive investors looking for a solid addition to their portfolios amidst market volatility.
More...
Twin Oak ETF Company has introduced its first fund, the Twin Oak Short Horizon Absolute Return ETF (TOAK), which started trading on the NYSE Arca on August 20, 2024. The ETF will feature active management and securities with less than one year duration.
It caters primarily to family offices and tax-conscious investors, offering a new option in the active ETF space. According to Twin Oak CEO Zach Wainwright, the fund combines high-quality portfolio management with the tax efficiency and accessibility of an ETF.
Co-managed by Wainwright and Greg Stoner, the ETF marks the firm's first step in bringing institutional-level strategies to a wider audience. Twin Oak's goal is to offer innovative investment solutions through a tax-aware approach.
Finsum: These absolute return strategies aren’t without risk but they can be a way to generate less correlated returns in the current environment.
Interest rates are on the decline, yet economic growth remains steady. As the year wraps up, investors are feeling optimistic despite some slowdown in growth, which is occurring gradually rather than sharply.
With more clarity around interest rate movements, Alliance Bernstein anticipate increased investor confidence, which should spur capital formation and boost private market transactions. Lower borrowing costs, following the sharp rise in recent years, are expected to encourage mergers and acquisitions as well as demand for middle market loans.
Additionally, the trend of bank disintermediation is creating new opportunities for private credit investors to diversify and grow their portfolios. Overall, navigating this evolving economic landscape will require a focus on quality and thoughtful diversification to manage risks effectively.
Finsum: We expect lower rates to facilitate further expansion of private credit as there is more consumer spending to support investments.
The investment landscape is buzzing with new possibilities as fund companies aim to make private equity more accessible to everyday investors through vehicles like interval funds. These funds are generating interest by allowing portfolios to include significant allocations to private assets, sidestepping the limitations imposed on traditional mutual funds.
While the ability to invest in private equity within an interval fund offers diversification, the illiquid nature of these holdings presents serious challenges. Liquidity issues, compounded by venture capital structures, can severely limit the ability to trade private assets.
Despite these hurdles, the demand for private market exposure in interval funds continues to rise, presenting both opportunities and significant risks for investors seeking to enter this space.
Finsum: If liquidity concerns are not very high then this alternative makes a lot of sense for many investors.