Investment Insights

Latest Investment Insight - 10/26/18

A Macro View – Value, Soon To Be In Vogue?

Investors continuously look for an edge, seeking to maximize returns relative to risks. Favored strategies change cyclically, or trend during certain market environments, but one has always been in style: value investing. Value investors attempt to find underpriced stocks relative to fundamentals, and often examine valuation ratios or use a discounted cash flow model to uncover them...


The desire to structure and manage client portfolios is oftentimes part of the advisor’s value proposition. Selecting investments and being responsible for those decisions can be a worthwhile endeavor. But how effective is it in the long run?


Are you confident you are choosing the best managers for your clients? The data may surprise you.


The equity market was generally kind to investors during the first three quarters of 2018. Then October hit. Volatility was back. Technology stocks were pummeled. Each day seemed painful for investors.


Successful advisors view the year end as an opportunity to assess their business from a revenue source perspective to make informed decisions going forward. With that in mind as 2018 draws to a close, we thought it would be worthwhile to examine current advisory and client fees on Envestnet’s platform.


We’ve been on quite the roller coaster ride in the last quarter of 2018. Market volatility has returned. Perhaps that is a sign of a more normal market environment, but that’s not the point of this Envestat. Market volatility often drives investors into emotional and perhaps irrational behaviors. So it matters how a portfolio is constructed and managed.


This past December felt like the Grinch was staging a coup to steal our holiday cheer, obliterate year-to-date returns, and create angst among investors. Then lo and behold Santa finally arrived in January. Better late than never. The markets rebounded, and investors breathed a sigh of relief. We experienced the most hair-raising part of a roller-coaster ride in those two months. This was a major wake-up call that volatility is back, and we better be prepared for more exciting rides in the future.


We thought it might be interesting to take a look at the shifts advisors made in managed account investment programs in 2018. We wanted to see where assets moved and which programs were favored.

We pulled and analyzed data on more than 38,000 investment switches advisors made during 2018 and came away with some compelling takeaways.


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. We aimed to answer the following questions:

• If we are in a “risk-on” environment, what investment styles are winning the bulk of mutual fund and ETF flows?
• What styles are experiencing the largest outflows?
• Are the results comparable between UMA and APM portfolios?


After many years of market gains, consumer confidence is high. The market environment appears to be making investors brave and willing to take on more risk. Is now the time to take on more risk and are consumers investing as if they’re invincible? Have they forgotten how devastating large losses can be to a portfolio and how long and difficult it can be to recover?