Envestnet, a provider of technology and wealth management solutions, has unveiled a new offering to help advisors manage the risks of concentrated stock positions for their clients.
Developed by Envestnet affiliate QRG Capital Management, the new the Options Strategy Quantitative Portfolio (QP) solution offers strategies aimed at addressing tax risks, liquidity challenges, and market volatility for high-net-worth investors.
The Options Strategy QP provides three customizable, options-based approaches: covered calls, protective puts, and collar strategies. According to Envestnet, these strategies enable advisors to mitigate risk and generate income for clients while unwinding concentrated stock positions over time.
“This new Options QP strategy, which will allow advisors to build better portfolios around low-cost basis shares and other investment needs, is a great addition to our suite of personalized solutions,” Dana D'Auria, co-chief investment officer at Envestnet, said in a statement Monday.
Concentrated stock holdings, whether from company stock grants, inheritance, or long-term investment loyalty, can expose investors to significant losses if the stock underperforms. Additionally, if the stock positions are large and illiquid enough, they can prove difficult to sell without impacting the market, and gains can lead to hefty tax liabilities. By offering options-based strategies, Envestnet aims to give HNW investors a pathway to hedge risks while spreading out taxable gains.
Since its $4.5 billion take-private acquisition deal, which involved a consortium of investors including Reverence Capital, BlackRock, Fidelity and other strategic partners, Envestnet has pushed out several enhancements aimed at boosting support for advisorts to HNWIs and the ultra-high-net-worth, including high-touch services for accounts exceeding $1 million, a Proposal Desk to streamline the process of generating managed account proposals for HNW clients, and an enhanced partnership with Franklin Templeton, one of its strategic investors, to introduce more indexing capabilities to its advisor network.
Commenting further on Envestnet's new options strategy offering, Brandon Thomas, co-chief investment officer and co-founder, stressed the importance of ensuring customization in a scalable fashion.
“We have created a broad, scalable solution which can be customized to help individual investors optimize the income from concentrated stock positions,” Thomas said, adding that the strategy relies on Envestnet’s quantitative methodology to help investors tailor their approach based on risk tolerance and financial goals.
The Options Strategy QP is part of Envestnet's growing suite of Quantitative Portfolios, launched initially in 2013, which has seen a 40 percent annual growth rate in accounts over the past three years. As of the second quarter of 2024, these portfolios managed more than $12 billion in assets.
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