Digital model marketplaces adding more active management strategies

As financial advisers look for answers during the continued market sell-off, some are turning back toward active management strategies after a decade of favoring passive investments.

[More: Advisers get bullish in a bear market]

Digital investment model marketplaces are hoping to meet the demand. Technology vendor Oranj announced Thursday that active model portfolios and investment products from Allianz Global Investors will be available on Oranj’s model marketplace.

“Our commitment to active management and extensive sustainable investing expertise presents the platform with a differentiated product line-up that caters to the needs of advisors and the clients they serve,” Will Abbott, head of RIA US at AllianzGI, said in a statement. “Active is the most important word in our vocabulary. Active is how we create and share value with clients.”

While Oranj does have some actively managed funds and ETFs already on its model marketplace, founder and CEO David Lyon said AllianzGI’s model portfolios dedicated to active management take it a step further.

“I think Allianz brings a really strong track record of active management,” Mr. Lyon said. “That’s what they hang their hat on.”

The partnership isn't a response to the recent market volatility but something the companies had been working on for a long time, Mr. Lyon said. Even before the COVID-19 pandemic ended the longest bull market in history, he had heard from advisers on the Oranj platform who were looking to add more actively managed solutions into portfolios.

[More: What’s keeping advisers from using investment model marketplaces?]

“I think advisers have been very astute in terms of valuations of companies, looking at record all-time highs in the market and understanding that this is not going to continue for another 10 years,” Mr. Lyon said.

The coronavirus crisis is certainly accelerating moves as advisers are looking more deeply at the overall investment management approach, he added.

Oranj isn’t the only digital model marketplace looking to increase the selection of active strategies available to advisers. Orion Advisor Solutions chief investment officer Rusty Vanneman said his company is “without a doubt” looking to add more active management to its model marketplace.

Though Mr. Vanneman thinks the current crisis will depress the overall demand for investments in the near term as consumers keep more assets on the sidelines, money that remains invested will increasingly be directed toward active strategies.

“Because of the volatility, there’s a lot of dislocation in the marketplace,” Mr. Vanneman said. “I do think there will be a resurgence in active management because of this.”  

[More: New sources for data on model portfolios could help increase adviser adoption]

Mike McDaniel, chief investment officer at Riskalyze, said the technology vendor “has invested millions” toward both active and passive advisers and cited First Trust and Pimco as the two most heavily used active managers on the Riskalyze model marketplace.

Mr. Lyon believes a wide range of strategies, including passive, active and diversification models, will all play a role in helping advisers manage investor fears about the market.

“When we see times like this, investors can do one of two things. They can either retreat or they can look at this as an opportunity,” he said. “We don’t see opportunities like this very often.”