Envestat is a series of monthly reports that deliver powerful insights, trends, and predictions about investor behavior and advisory practices brought to you by Envestnet. Each edition focuses on a specific area of interest shaping the industry.
We intend to offer industry leading insights through the intersection of our data and human capital. This is part of our deep commitment to empower advisors with better information to grow their business and better serve their clients.
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One of the fastest growing product lines in the wealth management industry today is the Fund Strategist Portfolio.
A Fund Strategist Portfolio (FSP) is an asset allocated portfolio consisting primarily of mutual funds and ETFs. These can be used as a core portfolio or as a complement or satellite solution. FSPs typically are segmented according to risk, with asset allocation strategies that extend from capital preservation to aggressive growth.
Earlier this year, we charted the dispersion of returns in fund strategist portfolios (FSP) and advisor-managed portfolios (APM). Our scattergram captured how much more volatile APM portfolios were and showed their standard deviation was twice that of FSP portfolios. In this edition of Envestat, we expanded on our previous analysis to provide more granularity to that volatility with respect to advisors and accounts that had outperformed and underperformed in both products and sought to answer the following key questions: How are advisors and accounts distributed on a performance basis in both programs, and how does that compare to the average performance? Is there a meaningful difference in the distribution when comparing APM against FSP programs? What is the implication for the end-investor?
In our September Envestat, we explored which investment styles were attracting new advisors as well as those losing advisors. In our October edition, we extended the analysis to examine whether these advisors made good style choices.
The equity market has been kind to investors thus far in 2017. US equity market returns were relatively high in the first half of the year; and international equities (both developed and emerging markets) took off, particularly in growth-oriented stocks.
With this in mind, we thought it would be useful to examine how advisors using the Envestnet platform were allocating portfolios, and which investment styles were garnering the most advisor attention.
With the first six months of 2017 now behind us and the markets providing a tailwind, we thought it would be an interesting exercise to extend our analysis of last month’s Envestat (“Are Investors Feeling Overconfident”) and focus on where the flows are going by investment style and asset class.