Displaying items by tag: volatility

While model portfolios, of course, help pare down some of the labor inherent to the analysis of all investment positions, some advisors, nevertheless, outsource some – or all – of the investment management responsibilities by tapping third part model portfolios, according to flexshares.com.

Unlike funds, among other traditional investment vehicles, external solutions like third party portfolios provide financial advisors leeway over a gambit of aspects of managing a portfolio. They include  underlying holdings, asset allocation, rebalancing frequency, and trading.

“Advisors are typically seeking a holistic, cost-efficient, outcome-oriented solution from a trusted brand. Our models seek to provide a robust framework to navigate global markets and offer a straightforward means to help advisors build scale, enhance client service and satisfy regulatory expectations,” according to Melinda Mecca, director of Investment Solutions, Northern Trust Asset Management.

Also referred to by some RIA in the industry as the separately managed account, they’re used by investment advisors for accounts with higher AUM or asset under management, according to  synertree.io.

Now, trade and asset allocation decisions are beyond the wheelhouse of an RIA, but should have the chops to know the product without in extensive insight into each security within the model portfolio, the site continued.

Wealthy investors are hitting a pandemic low in terms of optimism around the market as concerns flare up surrounding volatility. The latest survey by UBS shows that inflation and geopolitics are weighing down investor sentiment regarding optimism. The majority of investors are concerned most regarding inflation and are shifting into cash holdings and the inflation concerns have them weary about where to invest. Under a third said they would increase market holdings if there was a 10% blow-off. Still, investors show a desire to invest in long-term assets such as renewables and smart mobility.

Finsum: Keeping a long eye is a smart play right now but older investors are in a difficult position regarding the market. 

Tech stocks are suffering and pushing the Hong Kong broad market index lower early this week. Companies like Alibaba and JD.com were driving this slump. Overall, economic data has been positive for China though. The latest report showed that dollar-based exports grew by almost 20% in July. The region as a whole is experiencing diverging patterns in equity performance as South Korea and China excluding Hong Kong both grew. Still with currency risk higher than usual as a direct result of Fed tightening and higher inflation emerging market investors are having a difficult time finding North in the current environment.

Finsum: If covid is starting to slow as a result of the climate it could be great for countries relying on trade. 

To say investors are worried about the volatility in their portfolio in the current environment would be putting it lightly. The stock market gyrations are putting investors and their advisors in a difficult place. One way to manage volatility is to help clients calculate the Value at Risk for stocks or their whole portfolio. While VaR often is thought of as a heavily quantitative endeavor it's simpler in implementation than advisors might imagine, and only a small amount of statistics is necessary to calculate the VaR. It is a handy metric because it's a good gauge of the volatility underlying securities, and can help communicate and find better securities for investors.

Finsum: VaR is pivotal to forming long-short positions for clients and is an excellent addition to an advisor's portfolio of tools.

Actively managed exchange-traded funds are seeing an influx of interest as investors are concerned about the escalating market volatility. Active funds are touting their advantages of weathering volatility by making better day-to-day shifts at the portfolio level. One advantage active portfolio managers have is selecting areas where they can have an edge or avoiding places with the most volatility. For instance, tech stocks are down nearly 30% depending on which index you may be looking at. Volatility is expected to continue for the near term as the Fed is projecting another 75 bps hike in the upcoming meeting and a recession is hoving over the economy like a black cloud.

Finsum: Passive ETFs may be contributing to excess volatility according to breaking financial research; it makes sense investors would turn to active funds.