ETFs, model portfolios among the hottest investment trends for 2024

Uncertainty and volatility that have kept many investors on the sidelines recently means cash holdings are elevated, but ETFs and model portfolios are likely to be among the temptations to put that cash back to work.

A 2024 outlook from Natixis Investment Managers draws on the expertise of the firm’s team of portfolio managers, strategists, and executives to identify the potential opportunities ahead for investors.

The year that’s just begun comes with continued uncertainty, not least from geopolitics with war, and elections in many parts of the world including the presidential election in the U.S., although the latter should mean an all-out effort to avoid recession.

Looking at some positives, fixed income investors are starting to see better things in 2024 such as meaningful real yields and equity valuations, especially in the value category, following tough times for bonds last year.

MODEL PORTFOLIOS

Among the hottest investing trends for 2024 is model portfolios, which Marina Gross, head of Natixis Investment Managers Solutions, says is at the nexus of the trends driving wealth management industry this year.

“Firms are looking to provide a more consistent investment experience for clients in an increasingly complex market, advisors are looking to grow their practices and know clients want more than an allocation plan, and clients are looking for broader more comprehensive relationships with their advisors. Models offer a solution that fits the bill for each in 2024 and beyond,” Gross explained.

Model portfolios are helping firms address two key issues, risk management and keeping investors invested for the long-term. Natixis IM’s research shows that more than half of the wealth management firms who offer model portfolios plan to move more clients into model portfolios in 2024.

For financial advisors, model portfolios are expected to play a key role in helping win more clients by showing value beyond asset allocation, and a Natixis IM survey last year revealed that investors in models are almost twice as likely to say they’re confident about their finances than those who aren’t.

ETFs

Another hot market is ETFs which are expected to see continued strong demand this year and some emerging trends.

Nicholas Elward, head of Institutional Product and ETFs at Natixis Investment Managers, says that a couple of subsectors in the options overlay type category will be attractive such as options income and risk buffering products.

Elward says that concentrated equity will also be a strong trend in ETFs, as reflected in conversations with U.S. advisors and investors.

“Investors want their active managers to take decisive bets on their top ideas. Concentrated investing isn’t new among mutual funds, but with increasing numbers of active ETFs launching of late, we are seeing more of these ETFs becoming available to investors,” he said. “A concentrated portfolio construction approach has the potential to empower experienced active managers to deliver above-average returns while ensuring effective risk management.”

Short-duration bond ETFs is the third big trend due to attractive yield, potentially lower risk, and for maintaining flexibility.

“Despite a plethora of ETFs on the market, we see 2024 as another year with huge growth for the ETFs. Demand continues to drive higher and higher every year as ETFs fill particular roles in investors’ diversified portfolios,” concluded Elward.