New research from global analytics firm Cerulli Associates finds that over the past five years, packaged portfolios have outperformed advisor-driven portfolios.
“Currently representing nearly $900 billion in assets, packaged portfolios have become incredibly popular,” states Frederick Pickering, research analyst at Cerulli. “Much of the success of packaged portfolios has been driven by a new business model, with direct platforms gathering significant assets without having a traditional advisorforce.”
In their latest annual report, Managed Accounts 2015: Battle for Discretion, Cerulli analyzes the fee-based managed account marketplace, which has been a core research focus since the firm’s inception in the early 1990s. This report, in its thirteenth iteration, is the result of ongoing research and quarterly surveys of asset managers, broker/dealers, and third-party vendors, which captures more than 95% of industry assets.
Cerulli believes a key factor in the outperformance of the packaged portfolios is the fact that they remain invested in the markets throughout market pullbacks and recoveries. “The home office is more removed from the daily concerns of clients, and as a result can maintain the resolve to stay invested while advisors feel pressure from their clients, and themselves, to act to avoid short-term losses,” Pickering explains.
“We believe the outperformance is primarily driven by qualified home-office teams dedicating their time to asset allocation, manager selection, and staying invested in the market during downturns,” Pickering continues. “Home-office teams are more quantitative in their approach to manager selection and are not as swayed by qualitative factors such as fund company’s reputation or wholesaler relationships.”
“Advisors have a lot of hats to wear, and while advisors value flexibility, they must remember that portfolio construction is not a part-time job,” Pickering adds. “On average, advisors spend 60% of their time on client-facing activities, 18% on administrative activities, and only 17% on investment management.”
Source: Cerulli Associates
