Eq: Tech

A new study from Escalent details model portfolio use and acceleration since the pandemic. There has been a slow number of model portfolio adoption from third party issuers since the pandemic but those already using third party MP have had a significant uptick with over a fourth of them have seen an increase in use. However, advisors that lean on in-house production have mainly kept it that way which is a little over half of the users. Overall third-party adoption is still on the rise, and that's despite advisors' apprehension of MPs when compared to standard active management during high volatility.

Finsum: Model portfolios seem to be simplifying the advisor decision-making process, regardless of whether they are in-house or third party.

Many investors have become accustomed to the rising equity prices that have been pumped up by an ultra-low rate environment and are overexposed to too much risk, at least that's the opinion of 4/5ths of investment professionals surveyed by Natixis Investment managers. Over 3/4rs of professionals surveyed said that inflation and interest rates were the biggest risks to portfolios moving forward. The way out of that risk exposure is to have more active management which can thrive when the risks are apparent. The other solution is model portfolios which have been built to target specific risks like inflation or interest rate risk. Finally, advisors are being begged to add crypto to portfolios in a high weight, and are unsure of how this fits into portfolios.

Finsum: Regular volatility or supply-side shocks are almost impossible to predict, but when the risks are very apparent investors should take the necessary precautions.

Direct indexing is in its infancy in UK and Euro area, whereas across the pond it has taken off quickly. Driving the growth in the U.S. is the ability for direct and custom indexing to accommodate the US tax system and those benefits just aren’t present in Europe. However, ESG is a well-developed market and direct indexing is turning the heads of many ESG investors for its custom approach. Experts say the institutional knowledge in Europe could make it a haven for direct indexing because larger ETFs take too simple of an approach. Morgan Stanley’s Paramterics sees a natural marriage of these industries because experts can develop more robust indices or individual investors can drop the greenwashers from the indices they are tracking.

Finsum: ESG could vault direct indexing to the investing frontier in the way that tax-loss harvesting has in the U.S.

Page 3 of 46

Contact Us



Subscribe to our daily newsletter

We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…