Displaying items by tag: risk

Investors grappling with market uncertainty are exploring ways to manage risk effectively while staying invested; utilizing buffer strategies, which employ options to provide targeted downside protection, offers a solution by mitigating losses during market downturns while limiting upside potential.

 Accessing buffer strategies through ETFs simplifies the process, avoiding the complexities of managing options directly or the expense of structured notes. Buffer ETFs, managed by experienced professionals and offering intraday liquidity at a low expense ratio, present an accessible option for investors. 

Designed for long-term strategic allocation, these ETFs can be utilized by investors looking to reduce equity drawdown risk, seeking moderate growth, or exploring outcome-oriented strategies within their portfolios, thereby providing a flexible approach to risk management in uncertain markets.

Finsum: Buffer strategies seem to make the most sense when there is overall upside but potential for volatility, similar to our current macro landscape.

Apollo Global Management Inc. has launched a new private credit fund, initially offering no fees for the first year and halving fees for the subsequent year, with investments coming from Mubadala Investment Co. and other institutional investors. 

Structured as a business development company, it diverges from the norm by providing fee breaks, unlike many similar vehicles catering to retail and high net worth investors. Contributions from Mubadala and Apollo's affiliate amount to over $290 million, while the fund's assets total over $790 million, predominantly acquired through leverage. 

Named Middle Market Apollo Institutional Private Lending, the fund is an extension of the collaboration between Apollo and Mubadala, established in 2020, focusing on investments in US middle market companies, with a target allocation of 70% to 80% in loans. The fund's filing also stipulates a provision where Apollo would redistribute cash from sales or loan repayments to investors if it fails to double its investment commitments to $900 million within five years.

Finsum: Private credit could provide an uncorrelated return as macro uncertainty permeates markets.

Lincoln Financial Group unveils the 1 Year S&P 500® Dual Trigger (Dual Trigger) account option for its fixed indexed annuities, offering growth potential in all market conditions with 100% downside protection. 

Consumer concerns about inflation, investment losses, and market volatility have driven demand for such products, with 61% of consumers seeking investments balancing growth and protection. With industry projections expecting fixed indexed annuity sales to reach nearly $100 billion in 2025, Lincoln Financials’ enhancements aim to simplify strategies, providing growth opportunities while safeguarding against volatility. 

Additionally, Lincoln introduces the 1 Year S&P 500® 10% Daily Risk Control Trigger for its OptiBlend® fixed indexed annuity, offering potential for higher trigger crediting rates in certain markets. With a commitment to helping investors protect their savings, Lincoln Financial expands its annuity product portfolio to offer clients more choices for building wealth and confidence in retirement, working with over 22,000 financial professionals in 2023 to provide new annuity contracts.

Finsum: The recent uptick in annuity products appears to be driven by demographic shifts and boosted demand. 

2024 has seen the stock market make 17 closing, all-time highs. Despite this strength, many are noting some reasons to be cautious about equities due to some concerning developments under the surface.

In essence, the strong performance of the indexes and mega-cap technology stocks is masking hidden weakness. This is reflected in the Dow Jones Transportation Average failing to confirm the new highs of the Dow Jones Industrial Average which is a ‘non-conformation’ according to Dow Theory. Dow Theory warns that a new high by the Industrials but not by transportation stocks is prone to failure. Similarly, riskier parts of the market like high-yield bonds and high-beta stocks are also underperforming Treasuries and low volatility stocks, respectively. 

The leader of this bull market has been technology due to excitement around AI and strong earnings growth from leading tech companies. However, there are signs of exhaustion as the relative ratio of the S&P 500 tech sector has failed to confirm the breakout in the S&P 500. According to David Rosenberg, the founder and President of Rosenberg Research, “These were the most important stocks for the market, and no longer look to be in control.” He believes that the longer these measures fail to confirm the new highs in the S&P 500, the larger the risk of a reversal. 

Finsum: 2024 has been a strong year for the stock market with the S&P 500 making new highs. Yet, there are some signs that the rally may be nearing exhaustion. 

Category: Eq: Total Market 

Keywords: #S&P 500; #bull market; #tech; #equities; #risk; 

Natixis conducted a survey of 500 investment professionals, managing a combined $35 trillion in assets. The survey showed that investors are adjusting their allocations in expectations of more volatility in 2024 due to more challenging macroeconomic conditions. 

A major change in the survey is increasing preference towards active strategies as 58% noted that active outperformed passive for them in 2023, and 63% believe active will outperform this year. Overall, 75% of professionals believe that being active will help in identifying alpha in the new year. 

In terms of fixed income, 62% see outperformance in long-duration bonds, although only 25% have actually increased exposure due to uncertainty about the Fed. In addition to increasing duration, many are interested in increasing quality with 44% looking to increase exposure to investment-grade corporate debt and US Treasuries. 

Money continues to flow to alternatives with 66% believing that there will be significant delta between private and public market returns. Within the asset class, fund selectors are most bullish on private equity and private debt at 55%. 

With regards to model portfolios, 85% of firms now offer them either in-house or through third-party firms. Due to increasing demand, the number of offerings are expected to increase. Benefits include additional diligence and increased odds of client retention during periods of uncertainty. They also help form deeper relationships with more trust between advisors and clients, leading to more of a relationship focused on comprehensive, financial planning. 

Finsum: Natixis conducted a survey of 500 investment professionals and found that model portfolios are increasingly popular. Another major theme is that volatility is expected to remain elevated in 2024 due to uncertainty about the economy and Fed policy.