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Brandon Nielson, managing partner, co-founder, Keystone Wealth Management EDGE
Brandon Nielson, managing partner, co-founder, Keystone

Live From Wealth Management EDGE: SMAs, Inflation and the Fed

Speakers at Wealth Management EDGE at The Diplomat Beach Resort in Hollywood Beach, Fla., discuss how investing strategies, including SMAs and digital assets, and how inflation and the Fed are impacting investing.

What’s the Future of Portfolio Construction?

Asset managers debated the future of portfolio allocation during Wealth Management EDGE. Jonathan Shelon, COO, Kraneshares, says it’s defined outcome and defined income, and using more explicit things that you can predict for clients.

David Blanchett, head of retirement research at PGIM DC Solutions, argued the future will be acknowledging the behavioral aspects of why people invest and how much risk they’re willing to take. Advisors will focus on keeping clients invested and not losing track of what they’re doing.

Michael Meehan, managing director and portfolio strategist at Nuveen, predicts a higher tax regime, valuation headwinds and higher inflation in the future. Therefore, he recommends using direct indexing to manage tax liabilities and building private assets into portfolios for insulation.

—Diana Britton

Getting Comfortable With Digital Assets

Since the spot bitcoin ETFs have gone live, we’ve seen [average] allocations to digital assets go up to between 1% and 3%, said Don Friedman, president, Digital Assets Council of Financial Professionals. He and other speakers in the panel, Bull or Bear: Why Investors Should Care About Digital Assets, said the emergence of the bitcoin ETFs have made many more people more comfortable with investing in bitcoin and after an introduction to those, it’s easier to introduce them to other digital assets. 

Mike Reed, senior vice president and head of digital assets development at Franklin Templeton, said, “If you are confused about what’s going on here, do it, engage, go on Coinbase, get some bitcoin.” Reed said doing so himself helped him better understand both the potential and the pain points of investing in the space. 

“In terms of the fees [on the bitcoin ETFs], it’s 19 bps, and you are not expecting a 7% annualized return, you are expecting much larger,” Friedman said.

—Elaine Misonzhnik

'The Wealth Effect'

Stan Sattler, director of investment solutions at Belle Haven Investments, a boutique asset manager, said the trend toward separately managed accounts is due to the “wealth effect.” With interest rates up, institutions are rebalancing into fixed income as a tactical move. Those large money centers are driving more money into SMAs. 

Sattler says Belle Haven is asked all the time to build an ETF based on their bond strategies, but that scares him. The liquidity structure hasn’t yet been tested in the fixed income space. If there’s a large liquidity need, some ETFs could have a hard time meeting that need, unless they’re a large, well-capitalized shop. 

—Diana Britton

Investing Playbook Keynote Address: Navigating Market Dynamics: Trends Impacting Advisors and Clients

Brian Klimke, chief market strategist at Cetera Financial Group, during his keynote address that if shelter costs are taken out of CPI, inflation is close to 2% and is not that far off the Federal Reserve’s target.

And shelter costs are deflating, there’s just a lag in reporting. So it’s still possible we might see the Fed cut rates three times this year, he said.

—Elaine Misonzhnik

Growth Forum Keynote Address: How to Utilize Alternative Real Estate Strategies in Client Portfolios

The multifamily sector is facing a storm, with values down 30% from peaks, higher interest rates and a $1 trillion wall of maturities in the next few years that will be difficult to refinance, said Brandon Nielson, managing partner, co-founder, Keystone, during his keynote address. Investors will have three options. They can try and raise new equity from their current investors, sell properties for a loss or face foreclosures.

“One mitigant is if the Fed bails everyone out,” Nielsen said. “If the Fed cuts by 200 basis points, it will bail most everyone out over the next 12 to 24 months. If that happens, three-fourths of borrowers will get bailed out. Anything less, it will be a train wreck. That’s why inflation being still stubborn is a problem right now for real estate investors.”

—David Bodamer


Note: This live blog will be updated throughout Wealth Management EDGE

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