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1) Alternative Investments: Nearly Half of Wealth Advisers Plan to Boost Allocation to Alternatives In 2021

DailyAlts  |  2/5/2021

Because… The survey by PPB Capital Partners found that about 45% of wealth advisors would increase their clients’ allocation to alternatives over the next 12 months. This is positive news for providers of alternative investment solutions, but asset managers should not get too carried away. With the S&P 500 Index gaining 18.40% in 2020, the index generated double-digit returns for seven out of the past 10 years. Solid market performance may give investors less incentive to warm up to alternative investments despite their presumable advantages. FUSE Research’s analysis showed that in the U.S. retail market, alternative mutual funds and ETFs experienced net outflows for three consecutive years. Investors yanked $14.1 billion in 2020, $23.1 billion in 2019, and $19.1 billion in 2018. The possible end of the bull market may make some investors realize the necessity of adding alternatives to their portfolio as a hedge against market risks, but we are not seeing a seismic change of the investor sentiment in terms of embracing alternatives.

2) HSAs Cut into 401(k) Contributions: Report

InvestmentNews  |  2/5/2021

Because… One of the interesting findings in the EBRI study is the negative effect of the employer HSA match on 401(k) contributions. According to Devenir research, employer associated HSAs have seen the highest average contributions. In 2019, individuals contributed an average $1,841, compared to $2,914 by an accountholder associated with an employer group ($880 of which came from an employer match). HSA providers should work more closely with employers to improve the take-up rate. Besides collaborating with employers on the selection of more attractive investment options, providing employee education is pivotal too, especially for small business owners. PSCA’s 2020 HSA Survey revealed that 56.1% of respondents indicated employee education is a primary concern, with difficulty of administration being a distant second at 13.4%. Among topics targeted with education, only 47.6% of organizations with 1-49 employees talked about how to understand tax benefits of the HSA, compared to 86.2% for organizations with more than 5,000 employees.

3) Active ETFs Not an Oxymoron

ETF.com  |  2/9/2021

Because… Based on ETF.com data, equity ETFs, which comprised 37% of the active ETF asset base, pulled in 54% of the net inflows in the past year, whereas fixed-income funds gathered 40% of the total intake. We expect equity ETFs to gather assets at a faster pace than fixed-income ETFs in 2021. DFA has amassed more than $700 million in three ETFs launched in November and December. The firm is also planning to convert six tax-managed mutual funds into new ETFs. Meanwhile, Fidelity added four active equity ETFs on February 1, 2021, which brought the number of its active equity ETFs to seven. T. Rowe Price expanded its active equity ETF lineup by filing for the U.S. Equity Research ETF a week ago. With the first group of nontransparent active equity ETFs establishing their one-year records this year, we believe more ETF providers will follow suit. Although passively managed ETFs will still dominate ETF assets and sales, we will not be surprised to see active equity ETFs start to draw more investor attention.