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Fidelity Adds Tax-Aware Model Portfolios, SMAs

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What You Need to Know

  • Fidelity has again expanded its model portfolio offerings, providing more choices for advisors to offer their clients.
  • The new Fidelity Target Allocation Tax-Aware Model Portfolios include nine equity and fixed income mix options.
  • Fidelity also added new SMA model portfolios, its first UMA models to be made available via Envestnet.

Fidelity Institutional has expanded its model portfolio lineup with the launch of Fidelity Target Allocation Tax-Aware Model Portfolios, including nine equity and fixed income mix options, as well as new separately managed account model portfolios.

The new target allocation model portfolios are available now via Fidelity’s managed account platform, Fidelity Managed Account Xchange, and Envestnet’s platform, the Fidelity Investment division said Thursday.

The fixed income allocations are 10/90, 20/80, 30/70, 40/60, 50/50, 60/40, 70/30, 85/15 and 100/0. Each comes in versions for I and Z share classes.

The new target allocation tax-aware model portfolios use a blend of actively managed funds from Fidelity and exchange-traded funds from other asset managers, with a goal to enhance total returns through fund selection and also help reduce the impact of taxes on returns, according to Fidelity.

The new offerings represent the latest expansion of Fidelity’s model portfolio lineup. In July, Fidelity added four new target allocation mixes to its model portfolio offerings, ranging from 10% to 100% stocks with the remainder, if any, in bonds.

“We’re committed to providing choice and flexibility, and as the marketplace and investor preferences continue to evolve, we want to enable advisors to efficiently manage their clients’ investments in a customizable way that is tailored toward tax efficiency,” according to Suzanne Daly, vice president of Model Portfolio Business Development at Fidelity Institutional.

“The tax-aware model portfolios leverage Fidelity’s decades of portfolio management experience and diverse investment capabilities to enhance the advisor experience and empower them to better serve clients through diversified offerings, flexibility, and customization,” she said in the announcement.

In addition to the target allocation tax-aware model portfolios, the custodian added Fidelity Model Portfolios with SMA.

This offering includes five equity and fixed income mixes (20/80, 40/60, 60/40, 70/30, 85/15), each versioned for I and Z share classes. They use a blend of mutual funds, ETFs and SMAs from Fidelity and other asset managers and were “designed to provide enhanced risk-adjusted total return across the risk spectrum,” the company said.

The Fidelity Tax-Aware Model Portfolios with SMA features five equity and fixed income mixes (20/80, 40/60, 60/40, 70/30, 85/15), also each versioned for I and Z share classes. They also use a blend of mutual funds, ETFs and SMAs from Fidelity and other asset managers, but these include municipal bond investments to help reduce the effect of taxes on returns, according to Fidelity.

Both model portfolios with SMAs are Unified Managed Account asset allocation models that use “SMA building blocks alongside active mutual funds and ETFs, making it easier for advisors to leverage Fidelity Model Portfolios within a larger UMA,” according to Fidelity.

These are the first Fidelity UMA models to be made available via the Envestnet platform.

Fidelity’s latest offerings include the availability of custom model portfolios through JPMorgan’s 55ip strategy engine. As a result, in addition to Fidelity’s pre-packaged model portfolios, advisors can now “design custom model portfolios that can be implemented through 55ip’s tax-smart technology, allowing advisors to add scale and efficiency to their practice and deliver better outcomes for clients,” Fidelity said.

Over 8,000 wealth management advisors are now subscribed to Fidelity Model Portfolio updates, the company also said Thursday.

(Image: Shutterstock)