In This Issue:
Vanguard to Acquire JustInvest
Vanguard has agreed to buy the direct indexing firm JustInvest. The firm said it was enticed by JustInvest’s tech-driven approach, and they’re not alone: The quantitative asset manager has attracted just over $1 billion in assets since its 2016 founding, setting itself apart with features that allow clients to create custom portfolios. Starting in 2020, Vanguard began running a pilot program to test the tech with some of its advisers.
Direct indexing—buying shares of all the individual companies in a given index rather than buying shares of an index mutual fund or ETF—was for many years too cumbersome and costly for most investors to attempt. But the rise of fee-free trading and fractional shares has made the practice more workable. Some investors prefer direct indexing to index funds because it enables them to fine-tune their holdings and take advantage of tax-loss harvesting with more precision. Others use the approach to build bespoke portfolios that align with their investment thesis or ethics (say, by adding an ESG screen).
Speaking of fine-tuning one’s holdings, it’s not clear to us why a $7.9 trillion firm like Vanguard, with a deep bench and deeper pockets, would acquire a billion-dollar firm rather than develop its own direct indexing offering. After all, Vanguard made its name as the king of indexing. Building capitalization-weighted portfolios, dealing with cash flows and keeping funds closely tied to their benchmarks should be skills squarely within their wheelhouse.
Yet, as we’ve covered time and again, the firm seems to have issues with its tech infrastructure. The decision to acquire JustInvest may signal that Vanguard’s executive team wasn’t convinced they could build a direct indexing product in-house.
That said, the new ship in Vanguard’s fleet could provide an upside for investors. While Vanguard’s index funds are already quite tax-efficient (particularly its Admiral shares and ETFs), direct indexing could allow investors to generate losses to offset gains in other parts of their portfolios.
Fidelity Expands Thematic Fund Lineup
Fidelity is still stuck on themes. It announced last week that it will be adding four new thematic funds to its lineup even as it merges four others.
Thematic funds invest in companies across a range of sectors, sizes and styles; the link between each is an adherence to a “theme”—a broad-based thesis about the direction of the economy or a societal trend.
Thematic funds have become popular with investors over the last few years. A recent report from Morningstar found they’ve drawn $81 billion in investor assets from Q2 2020 through Q1 2021. And Fidelity clearly aims to carve up a piece of that pie for itself; the fund giant rolled out its first thematic funds in 2019 and expanded its lineup last spring.
They intend to add more offerings to their thematic portfolio this fall: A Clean Energy ETF, Cloud Computing ETF, Digital Health ETF and Electric Vehicles and Future Transportation ETF are all slated to supplement Fidelity’s 20-plus-strong thematic suite, according to an SEC filing.
Fidelity hasn’t had universal success with their thematic lineup, despite the expansion. It also announced last week that it intends to merge four of its existing thematic funds into others (subject to shareholder approval).
Though the Fidelity brass are clearly believers, you can still count us among the skeptics when it comes to thematic funds. Their broad mandates and unique criteria for screening companies make it hard to find a suitable benchmark to assess their performance, or even to determine whether their portfolio managers are truly sticking to a thesis or just chasing the latest fad. We’ll be watching to see how Fidelity’s thematic lineup performs going forward—and if its bet pays off for investors in the end.
Third-Quarter Webinar: Rocket or Rollercoaster—Where Will the Markets Go From Here?
The stock market has rewarded investors this year. An improving economy, loosened pandemic restrictions and a massive vaccination effort have set the stage for strong gains and low volatility in the markets—despite fears of inflation, proposed tax hikes and the spreading Delta variant. Can the good times last?
Join us on Wednesday, July 28 from 4:30 p.m. to 5:30 p.m. EDT for our next quarterly webinar, Rocket or Rollercoaster: Where Will the Markets Go From Here? to learn why our chief investment strategists think volatility might return even as the economy continues to recover. Chairman Dan Wiener, Director of Research Jeff DeMaso and Chief Investment Officer Jim Lowell, among others, will discuss the current market environment and their outlook for the coming months. In addition to a market recap and commentary, this interactive webinar will allow our team to answer your questions and discuss your concerns.
As we head into the second half of 2021, we believe that investors have the opportunity to reassess their portfolios and prepare for the months ahead—and we’re eager to share our thinking with you. Click here to register now.
Podcast: Mid-year Market Recap
The stock market headed nowhere but up in the first two quarters of this year. But we think there are some challenges ahead. Chairman Dan Wiener and Chief Investment Officer Jim Lowell take a look back at the first half of 2021 as well as the risks that remain in the months to come. Their wide-ranging discussion covers:
- The recent spike in inflation and whether it will last
- The stock market’s turn from value to growth
- Whether investment opportunities in China are worth the risks
- How investors should think about the bond market’s low yields
Tune in to get Dan and Jim’s informed take on the trends we’re seeing in today’s markets and how Adviser Investments is preparing to tackle them. Click now to listen today!
Adviser Investments’ Today’s Market Takeaways
There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.
In our most recent Market Takeaways, Vice President Steve Johnson broke down last week’s increased volatility, while Research Analyst Liz Laprade dug into the market’s early dip this week.
We hope you find these episodes engaging and accessible. If there are any topics you’d like us to address, please send an email to email@example.com!
About Adviser Investments
Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. Adviser Investments was named to Barron’s list of America’s Best Independent Advisors and its list of the top advisory firms in Massachusetts in 2020, our eighth consecutive appearance on both lists. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015, 2016, 2018 and 2019.
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The Barron’s Top Advisor Rankings by State (Massachusetts) (also referred to as Barron’s Top 1,200 Financial Advisers) considers factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. According to Barron’s, “around 4,000” advisory firms were considered for this award in 2020, with about 1,200 firms receiving recognition. For more information and a complete list of recipients visit https://www.barrons.com/report/top-financial-advisors/1000/2020?mod=article_inline. Years Received: 2020, 2019, 2018, 2017, 2016, 2015 & 2014.
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