The performance of robo-advisors during the tumultuous first quarter was a lot like the performance of overall markets: Socially responsible investing portfolios tended to perform better than non-SRI portfolios compared to their benchmarks, as did portfolios that stressed high-quality corporate bonds and Treasuries over high-yield and emerging market bonds, according to the first-quarter Robo Report.
In addition, portfolios that were neutral on the growth/value spectrum did a lot better than those that stressed value when compared to their benchmarks.
The top performer for total portfolio for the first quarter, however, was a relative newcomer, Titan Invest, which, unlike most robo-advisors, has an actively managed portfolio. More specifically, its portfolio of about 20 stocks is hedged with a short position in the overall equity market, a “personalized hedge” that’s based on an investor’s personalized risk tolerance. The short position helped Titan place first for best equity portfolio in the first quarter despite its relatively high 1% fee.
Wealthsimple and Wealthsimple SRI took second and third place, respectively, for overall portfolios in the first quarter.
Wealthsimple also shined in the longer term. Its traditional portfolio placed first in the fixed income category for one and two years through the first quarter, supported by heavy weightings in long-duration Treasury bonds, according to the Robo Report. Its SRI portfolio took first place for total portfolio for one and two-year trailing periods, reflecting the longer-term outperformance of the category.
SRI portfolios occupied four of the nine best performance slots — first, second and third place for total portfolio, equity portfolio and fixed income portfolio — over the trailing one and two years, according to the Robo Report. In addition to Wealthsimple SRI, those portfolios include Morgan Stanley SRI.
A key reason for that outperformance: SRI portfolios don’t have a value tilt in their equity holdings, which many robo-advisors have, according to David Goldstone, head of research at Backend Benchmarking, which publishes The Robo Report. Value stocks have underperformed growth stocks for much of the bull market that ended this year, including the last three years, explained Goldstone.
“Over the three year trailing period ending on March 31, there are few notable trends: Large-cap stocks significantly outperformed small-caps, domestic stocks outpaced international and growth performed significantly better than value,” said Goldstone, in a statement.