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Portfolio > Portfolio Construction

New Portfolio Products for Uncertain Times

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Here’s a smattering of new portfolio models available:


Blackrock’s iShares plans to introduce three ETFs that exclude fossil fuels as part of its Advanced-branded product line for index-based ETFs that also screens out for-profit prisons, controversial weapons manufacturers, palm oil producers and companies with high controversy scores.

It rebranded its Sustainable Core ETFs as Aware funds, which include only companies with favorable environmental, social and governance characteristics but offer a similar risk and return profile to broad market indexes.

The Aware product line was originally introduced in March 2018 with several equity and fixed income ESG ETFs based on indexes from MSCI, which is also the index provider for the Advanced product line. In a few weeks, those indexes for the Aware-branded ETFs will add screens that exclude companies collecting revenues from thermal coal and oil sands.

State Street, which has several index ESG ETFs, has filed an application with the Securities and Exchange Commission to trade its first actively managed ESG ETF.

The SPDR SSGA Responsible Reserves ESG ETF will invest in short-term fixed income securities including Treasuries, mortgage pass-throughs and corporate bonds and screen out most issuers that are involved in or derive revenue from extreme event controversies, controversial weapons, civilian firearms, thermal coal extraction, tobacco and UN Global Compact (sustainability principles) violations.

Issuers in the financial services sector are excluded from this initial screening process but could be screened out under other ESG criteria.

New Model Portfolios

WisdomTree recently launched two multi-asset, open architecture model portfolios designed to challenge the traditional 60/40 portfolio approach. The new Siegel-WisdomTree Global Equity Model Portfolio and Siegel-WisdomTree Longevity Model Portfolio were developed in a collaboration between the firm and Jeremy Siegel, its senior investment strategy advisor, professor of finance at U Penn’s Wharton School and author of “Stocks for the Long Run.”

The new portfolio products should help advisors “deliver a solution [so] that their clients could generate income in retirement, [and] also manage their longevity risk because people are living longer and will need their assets … for longer periods of time than they have in the past,” said Tom Skrobe, WisdomTree head of product solutions.

The portfolios are “heavily allocated to equities … in seeking to mitigate the longevity short-fall risk,” and feature an all-exchange-traded fund portfolio structure that WisdomTree said helps to “optimize tax-efficiency.”

Although the Longevity Model Portfolio is strategic in nature, the firm said it also “reflects tactical tilts based on market conditions. It is “not a static model,” Siegel said. “If one asset class suddenly does not look favorable for one reason or another, we will reduce that asset allocation.”

New Alts

TD Asset Management’s latest alternative investment solution is the TD Greystone Global Real Estate Fund. The new fund joins the firm’s comprehensive alternative suite that includes real estate, commercial mortgages and global infrastructure.

The fund’s investment objective is to “seek strong long-term, risk-adjusted returns by investing in a diversified portfolio of direct and indirect global real estate investments,” according to the company. The fund has exposure to over 500 properties located in about 15 countries, it said.

“As investors increasingly look to manage portfolio risk, there is now a greater demand for adding a global real estate allocation that can complement an existing Canadian real estate mandate by providing additional diversification, a greater opportunity set, and the potential to enhance risk-adjusted returns,” said Colin Lynch, vice president and director of global real estate investments at the firm.

The new fund provides “access to the benefits of privately held global real estate assets,” he said in a statement.

TDF Developments

T-Rowe Price made enhancements to its target date retirement product portfolios that it said are “designed to help improve retirement outcomes and address the headwinds investors face in achieving retirement security, including longevity risk, inflation risk, and market risk.”

As part of what it called the “next evolution” of target date retirement products, the firm said that, “over a two-year period” starting this April, it plans to “gradually increase” equity exposure in the Retirement and Target portfolios’ glide paths early in the accumulation years and post-retirement and add emerging markets and U.S. large-cap core equity strategies to further diversify the underlying investments.

T-Rowe Price will raise the equity allocation of the retirement glide path at the start of the investing lifecycle (30 or more years from retirement) to 98% equity from the current 90% equity. The firm also will: Hold the 98% equity allocation constant until 30 years from retirement; maintain a 55% equity allocation at retirement; and raise the equity allocation after retirement, reaching a final 30% equity allocation 30 years after retirement, an increase from the current 20% allocation, it said.

For the target glide path, the company will boost the equity allocation of the glide path at the start of the lifecycle to 98% equity from the current 90% and also: Hold the 98% equity allocation constant until 35 years from retirement; maintain a 42.5% equity allocation at retirement; and raise the equity allocation after retirement, reaching a final 30% equity allocation 30 years after retirement, up from 20% now, it said.

The firm also added two investment strategies to the underlying building blocks of several target date products, it said. Emerging Markets Discovery Stock will be added to all the firm’s target date strategies, while U.S. Large-Cap Core will be added mainly to actively managed strategies, it noted.

Bond Model Portfolios

Fidelity Investments further broadened its lineup of portfolio construction capabilities for advisors in the fixed income space with a new suite of bond model portfolios including four strategies using mutual funds and exchange-traded funds.

The new model portfolios were “designed to maximize risk-adjusted total return as well as accommodate a range of risk preferences, including duration and credit risk,” the company said. They also supplement Fidelity’s Bond Income Model Portfolio, launched in 2019, that “aims to maximize risk-adjusted yield,” it noted.

The newcomers are:

  • Fidelity Short Multi-Sector Bond Model Portfolio, designed to provide a lower duration bond portfolio with a focus on investment-grade mutual funds/ETFs complemented by a limited allocation to non-investment grade);
  • Fidelity Core Bond Model Portfolio, designed to provide a core bond portfolio focused on a diversified allocation to investment-grade mutual funds/ETFs;
  • Fidelity Core Plus Bond Model Portfolio, designed to provide a diversified bond portfolio with a focus on investment-grade mutual funds/ETFs complemented by a limited allocation to non-investment grade); and
  • Fidelity Dynamic Bond Model Portfolio, designed to provide a diversified bond portfolio of fixed income mutual funds/ETFs while offering greater investment flexibility through duration and credit allocation), the company said.

The additions to Fidelity’s line come as “demand for model portfolios continues to grow among advisors,” it said, pointing to Cerulli data that indicated 95% of advisors said they always or sometimes used asset allocation models for specific strategies or objectives.

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