Displaying items by tag: models

Model portfolios have been a surprisingly quick growing tool for the financial industry in the last year, and Morgan sStanley’s Wealth Management is capitalizing by adding a series of new model portfolios. These strategies will have hefty minimums of $750k to $1.5 million and are targeting tax and direct indexing strategies from the recently acquired Parametric. This was a key reason Morgan Stanley acquired Parametric last year to rapidly develop and deploy direct indexing strategies. Overall the portfolios have acquired $150 million in assets since their inception in January.

Finsum: Financial companies took a page out of tech companies playbook by just acquiring the companies that might align with them and allow the to quickly scale when it came to direct indexing.

Model portfolios have been a hot topic with advisors and asset managers over the last couple years. Models tend to have nice benefits for both advisors and fund providers as they save advisors time gather up assets for managers. To back this up a new survey by Escalent shows that models are growing in popularity. Models are growing in number and in assets but they are primarily expanding among a small group of advisor power users. 4 out of 5 advisors say they don’t plan to expand their model use in the near term. The power users on the other hand say they love models because they free up their time to grow their client base and spend time on other planning.

FINSUM: Models are a major opportunity for advisors since they can outsource a very time consuming task—portfolio construction—thus freeing time and capacity to take on more clients.

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.

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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.