Wealth Management
SEI has expanded its suite of Separately Managed Accounts (SMAs) and Unified Managed Accounts (UMAs) by introducing new strategies focused on direct indexing and factor-based investments. These additions include fixed income strategies, such as the Systematic U.S. Aggregate Bond Core and the Systematic Municipal Bond Core, as well as equity options like the Systematic U.S. Dividend Yield Core and the U.S. Dividend Yield Multi-Factor SMA.
These offerings aim to help advisors serve mass-affluent, high-net-worth, and ultra-high-net-worth clients with tailored solutions that offer flexibility and tax optimization.
The move comes as UMAs gain popularity, with assets growing at an annual rate of 34% over the past five years, according to Cerulli. SEI’s expansion aligns with broader industry trends, as other major players like Envestnet and Dimensional.
Finsum: An SMA makes a lot of sense for direct indexing options given the tax implications.
The asset management industry is seeing a significant shift towards Separately Managed Accounts (SMAs), with assets growing by 30% over the past two years, according to Cerulli Associates. This growth is expected to continue, with projections suggesting SMAs will reach $3.6 trillion in assets by 2027, up from $2.4 trillion today.
SMAs offer tax advantages and personalization options that are appealing to investors, allowing them to hold individual securities and tailor portfolios to their specific needs. SMAs are particularly useful for strategies that benefit from direct ownership of securities, such as tax-loss harvesting and options overlays, which can enhance after-tax returns and generate additional income.
The rapid innovation in this space means that SMAs are becoming an increasingly attractive option for investors looking for a personalized approach to asset management.
Finsum: We expect the SMA boom to continue with trends in both demographics and wealth management in the US, so familiarity is key.
Investors remain concerned about how inflation could affect their portfolios. Despite the Federal Reserve's efforts, inflation remains elevated, making it a good time to consider adding inflation hedges to your investments. Here are three top inflation hedges to protect your portfolio:
- TIPS (Treasury Inflation-Protected Securities): These U.S. government bonds adjust their interest rates with inflation, providing a reliable safeguard for bond investments.
- Floating-rate bonds: These bonds adjust their payouts with rising interest rates, offering protection against inflation. You can access them through ETFs or mutual funds for added diversification.
- Real estate: Investing in a house with a fixed-rate mortgage can hedge against inflation. If a house directly isn’t possible SFR or REITs are great options.
Avoid long-term fixed-rate bonds and cash savings as they lose value in real terms during high inflation.
Finsum: Inflation still remains above the official Fed target and with a potential slew of cuts coming, inflation could spark again.
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Investors concerned about exchange-traded funds (ETFs) with options overlays limiting returns should consider the benefits these strategies offer. According to Tony Rochte, Morgan Stanley’s global head of ETFs, options serve as a hedge against significant losses, offering downside protection even if upside gains are capped.
This approach encourages investors to re-enter the broad-based equity market, reducing their exposure to fixed-income products. Alison Doyle, Nasdaq’s head of ETP listings, highlighted the growing popularity of active ETFs, with over 75% of all ETF launches in 2023 being active.
Among these, a significant portion included options-embedded strategies, providing additional risk management tools. This trend shows a shift from traditional fixed-income investments to risk assets.
Finsum: With stocks and bonds becoming more correlated, investors should consider outside strategies like overlays to hedge.
Goldman Sachs Asset Management has rolled out the Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF), marking its fifth ETF launch in 2024. This new fund targets high monthly income by investing in U.S. preferred stocks and hybrid securities, which currently offer yields between 6-7%, benefiting from the expected Federal Reserve rate cuts.
This strategy is designed to maximize yield while providing diversification benefits, as preferred stocks typically have lower correlations to core investment-grade fixed income.
Following the fund’s introduction, GPRF has quickly accumulated nearly $20 million in inflows. The launch of GPRF complements Goldman’s ongoing expansion into municipal bond ETFs, adding to the firm’s growing portfolio, which now includes 43 ETFs.
Finsum: ETFs are an interesting way for investors to get exposure to preferred stock.
Wealth managers rely heavily on platforms such as broker/dealers and custodians, with many considering switching due to operational needs or better financial arrangements. Additionally in a new study, a staggering 85% are willing to change for the right opportunity, but most don’t actively plan to make changes by 2025 or 2026, as inertia and the demands of their practices often hold them back.
Successful managers are more likely to switch platforms, driven by the need for enhanced operational support and favorable terms. Factors like financial arrangements, operational quality, and business development support are key in deciding platform affiliation.
Strategic relationships, particularly with centers of influence, are also critical for sourcing ideal clients. Wealth managers must critically assess platforms’ offerings and strategic positioning to ensure they meet their needs.
Finsum: It’s really critical that the broker dealer is offering as many business development opportunities so advisors can succeed.