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1、The Robo ReportBringing Transparency to Robo InvestingEdition 27|1Q 2023David Goldstone,CFAManager,Investment ResearchThomas Leahy,CFAFinancial AdvisorKristopher Jones,CFAFinancial AnalystKen Schapiro,MBA,CFAChief Executive Officer2The Robo Report Future Advisor sells its direct-to-consumer business
2、 to Ritholtz Wealth Management.Betterment reaches settlement with SEC,in part related to tax-loss harvesting software.Fidelity Go took the top spot 1-year perfor-mance thanks to,in part,a notable mega-cap and large-cap bias.Schwab portfolios held modest exposures to TIPs and high-yield corporates,wh
3、ich significant-ly outperformed their traditional investment-grade counterparts.Wealthfront(2016 Vintage),Zacks,and Fidel-ity Go accounts were the top three performers versus their Normalized Benchmark for the 5-year period.HighlightsWelcome to The Robo ReportCondor Capital Wealth Management is prou
4、d to publish the 27th edition of the Robo Report,covering the first quarter of 2023.This Report is a continuation of an ongoing study that monitors well-known robo advisors.We strive to provide a reliable resource for both investors and professionals interested in the digital advice industry.3The Ro
5、bo ReportContents4 Executive Summary5 Top Performers6 Performance Commentary9 Total Portfolio Performance10 Terms of Use and DisclosuresAll supporting data can be found online at TablesTotal Portfolio ReturnsEquity&Fixed Income ReturnsFees,Minimums,and AllocationsRisk StatisticsNormalized Benchmarks
6、International AllocationDisclosures4The Robo ReportExecutive SummaryThis edition of theRobo Report,published by Condor Capital Wealth Management,tracks 42 accounts at 27 different providers.TheRobo Reportcontinues to evolve,and this quarter,we bring you our usual data,which can be found online well
7、as performance commentary for the quarter.Important Notes for This ReportWe recently changed our technology provider for the portfolio management system used to track these accounts.This re-port reflects some important changes to the data we publish.These changes will be reflected in this and future
8、 reports.The most important of these changes are related to equity-only and fixed income-only returns.In previous reports,equity and fixed income returns were published on a net of fees basis,with the management fee proportionally allocated to the eq-uity and fixed income allocations within the port
9、folios.Equity and fixed income returns will be published as gross of fees in this report and going forward.Importantly,total returns are still published as net of fees.Additionally,in previous reports,we excluded commodities and funds like Wealthfronts Risk Parity fund,which does not fall cleanly in
10、to a fixed income or equity category,from the equity-only and fixed income-only returns.Going forward,commodities will be included in the equity return calculation.For the one account holding the Wealthfront Risk Parity fund,we will only publish total returns and exclude the fixed income and equity
11、returns from the report.Please note that only the Wealthfront Passive Plus account holds this risk parity fund.Additionally,we have removed some accounts from the report this quarter.Morgan Stanley Access Investing is being com-bined with E-Trades Core Portfolios product.Access Investing offered a v
12、ariety of themed portfolios.It is unclear whether these options will become available at E-Trade Core portfo-lios.Given they are not currently available to new investors,we have removed them from the report at this time.We have also stopped tracking Principle SimpleInvest,Liftoff,and Titan Invest as
13、 we try to maintain focus on the most relevant and important products in the space.Industry UpdateA few notable events occurred in the industry since our last report.Chiefly,FutureAdvisor,which was acquired by Black-rock in 2015,announced its direct-to-consumer business is being sold to Ritholtz Wea
14、lth Management.Under the control of BlackRock,the direct-to-consumer product had long lan-guished,and we witnessed very few product enhancements over the years.This followed the abrupt shutdown of Blooom late last year.Blooom stood out from other robos for their ability to manage 401(k)plans at any
15、custodian,allowing in-dividuals to have Blooom manage their 401(k)regardless of where it was held.Morgan Stanley acquired software from Blooom and hired senior management from the company.Betterment also just recently reached a settlement with the SEC,in part related to some issues with its tax loss
16、 harvesting software.The issue only affected a small number of their total client base.While this is clearly not good news for Betterment,we also acknowledge that when start-ups push the envelope of innovation,coding mistakes can occur.Thank you for being a subscriber to the Robo Report;we look forw
17、ard to bringing our Summer Edition of the Robo Ranking to our readers as part of our second quarter report this summer.5The Robo ReportTop Performers1-Year Trailing Top Performers Best2nd3rdTotal PortfolioFidelity GoWealthfront(Risk 4.0;2016)EllevestEquityBetterment Broad Impact SRIWealthfront(Risk
18、4.0;2016)Ally Invest Robo PortfoliosFixed IncomeZacks AdvantageE*Trade Core SRIFidelity Go 3-Year Trailing Top PerformersBest2nd3rdTotal PortfolioWealthfront(Risk 4.0;2016)Schwab Domestic FocusZacks AdvantageEquityWealthfront(Risk 4.0;2016)Schwab Domestic FocusZacks AdvantageFixed IncomeSchwabSchwab
19、 Domestic FocusFidelity Go 5-Year Trailing Top PerformersBest2nd3rdTotal PortfolioWealthfront(Risk 4.0;2016)Zacks AdvantageFidelity GoEquityZacks AdvantageAcornsWealthfront(Risk 4.0;2016)Fixed IncomeWealthfront(Risk 4.0;2016)Zacks AdvantageVanguard P.A.S.6The Robo ReportPerformance Commentary Schwab
20、 portfolios held modest exposures to TIPs and high-yield corporates,which significantly outperformed their traditional investment-grade counterparts.Fidelity Go and Wealthfront shine over the trail-ing 1-year period.Wealthfront(2016 Vintage),Zacks,and Fidelity Go accounts were the top three performe
21、rs versus their Normalized Benchmark for the 5-year period.Zacks continues to be notably more active from a fixed-income perspective.BackdropThe year 2022 will go down as a historic year for investors.Marked by the fastest increase in interest rates ever by the Federal Reserve,nearly all asset class
22、es performed poorly.Stocks and bonds fell,posting one of the worst years for the well-known 60%stocks/40%bond portfolio,as both asset classes were in negative double-digit territory for the year.For reference,the S&P 500 was down 18.1%,while the Bloomberg Aggregate Bond index was down 13.0%.Energy s
23、tocks were one of the only safe-haven asset classes as oil ticked higher and cash flow became a key attribute for stock leadership.Overseas investors did not do much better as developed markets and emerging markets had significantly negative returns.As 2023 unfolds,we are met with headlines of regio
24、nal bank-ing crises led by Silicon Valley Bank,furthered by Silvergate and Signature,and most recently,First Republic Bank.The failures of regional banks were spurred by cash sorting:the process of savers moving their money out of low-yielding bank accounts and into higher-yielding alternatives,such
25、 as money market funds.The current high-interest rate environ-ment has given savers reason to look for higher-yielding alter-natives to standard low-interest earning checking accounts.The flow of money away from bank deposits causes strain on banks with inadequate liquidity buffers,forcing them to s
26、ell assets or seek more expensive funding,or in some cases,be forced into receivership by regulators.Fearing more tur-moil for regional banks,investors hid in long-term treasury bonds,gold,and large-cap growth stocks for safety.Mean-while,much of the darlings of 2022,including energy stocks,are down
27、 or flat on the year.Fortunately,the problems seen in some areas of the market were overshadowed by surging prices of growth stocks.Overseas,Chinas reopening and a softening dollar have sup-ported international equities while the world navigates the Russia-Ukraine war.Emerging market countries were
28、early in their responses to increasing interest rates to tame inflation.This differs from developed economies which were caught flat-footed with rates.In the U.S.,for example,rates remained at near-zero levels even as inflation was climbing.Additionally,much of the emerging world does not suffer fro
29、m the same level of indebtedness as the U.S.and developed economies.However,any leadership in international markets would come as a regime change for U.S.investors,who have been heavily rewarded for their home-country bias for nearly a decade.It has yet to be seen how markets will unfold.Fidelity Go
30、 and Wealthfront Shine Over the Trailing 1-Year Period For this edition of the Report,the 1-year trailing period end-ing March 31,2023,includes the pain of 2022 and the mixed recovery in the first quarter of 2023.Fidelity Go,Wealthfront(2016 vintage),and Ellevest were the top winners of best total p
31、ortfolio performance versus its Normalized Benchmark,a methodology that juxtaposes each robo advisors returns against that of a comparable asset allocation.Although typ-ically,the winners in each category have many similarities,7The Robo Reportthere was a variety of different drivers,which ultimatel
32、y put these accounts in the top positions.When looking at the equity portfolios,Fidelity Go took the top spot thanks to,in part,a notable mega-cap and large-cap bias.For example,the Fidelity Go robo advisor had an average equity market cap of roughly$84bn compared to the average of our study group o
33、f about$64bn.This was important as the Russell 2000 Index,a U.S.small-cap index,returned 11.63%for the 1-year trailing period,whereas the S&P 500 returned 7.75%for the period.On the other hand,Wealthfronts equity allocation was bolstered by a dedicated energy stock expo-sure(VDE)and by SCHD,the Schw
34、ab Dividend ETF,which returned 11.42%and 3.80%,respectively,outperforming the S&P 500.Ellevest equity performance,on the other hand,was supported by a modest allocation to domestic stocks.At a time when the MSCI EAFE outperformed the S&P 500 by about 7%,Ellevests 39%allocation of its equity portfoli
35、o to non-U.S.stocks supported performance compared to the 34%allocation of our robo study group.On the fixed income side,the last year was a period of an ex-ceptional rate increase as the Federal Reserve raised its target rate range from 0.25%0.50%to 4.75%5.00%,punishing those with long durations.Fi
36、delity Go held a bond duration of about 5.8 years,a figure that was in line with our group of robo advisors.Ellevest,however,was exceptionally well positioned with an entire year of duration below the study group,at about 4.8 years of effective duration.Although Zacks Advantage did not place as a to
37、p overall robo advisor for the period,its fixed income return was especially impressive.Whereas the average robo fixed income return was 2.23%,Zacks Advantage fixed income return was 1.26%.Zacks is one of the most active robo advisors we track and was impressive in this regard,as it held a duration
38、of just 4.0.We commend the low-duration profiles of Ellevest and Zacks at a time when investors needed protection the most.Robo AdvisorEffective Duration Estimate1-Year Fixed Income ReturnZacks4.01.26%Ellevest4.80.57%Average Robo5.82.23%Source:MorningstarOver 3 Years,Wealthfront and Schwab Domestic
39、Focus Demonstrate Top PerformanceThe story for our Wealthfront portfolio is quite clear:the robo advisors bold allocation to energy stocks was a boon to in-vestors.To demonstrate how notable this outperformance was,for the 3-year period ending March 31,2023,whereas the S&P 500 returned 18.58%per ann
40、um,the Vanguard En-ergy ETF(VDE)returned 50.40%per annum for the period.As our Wealthfront 2016 vintage had a modest allocation to this ETF,its relative returns were outstanding.Adding to this outperformance was Wealthfronts SCHD allocation,returning 21.65%,per annum,for the 3-year period.Select Wea
41、lthfront ETFs/Indices 3-Year Trailing Annualized Returnas of 3/31/23Vanguard Energy ETF50.40%Schwab U.S.Dividend Equity ETF21.65%S&P 500 Index18.58%Meanwhile,Schwabs Domestic Focus portfolio benefitted from a few different choices,namely its fundamental-weight-ed ETFs.These are non-market-cap weight
42、ed funds that are instead weighted by a set of fundamental attributes like sales,dividends&buybacks,and retained operating cash flow.These have performed well:the Schwab Fundamen-tal U.S.Large Company Index ETF had an annual return of 23.18%,outperforming the S&P 500 by over 4.5%;the Fun-damental U.
43、S.Small Company Index ETF outperformed the Russell 2000 by over 7.71%per annum,though the interna-tional large-cap version outperformed the MSCI EAFE by over 3%per annum.Finally,the Schwab Domestic Focus portfolio was particularly attractive as U.S.stocks outperformed in-ternational developed stocks
44、 by nearly 5%per annum for the three-year period.On the bond side of the portfolio,Schwab and Schwabs Do-mestic Focus took the top two spots for fixed income per-formance.As has been well documented,Schwab tends to hold higher levels of cash which can be detrimental to long-term performance.However,
45、at a time when the Bloomberg 8The Robo ReportAggregate bond index was modestly negative 2.77%per annum,having cash-like instruments supported relative per-formance.Furthermore,our Schwab portfolios held modest exposures to TIPs and high-yield corporates,which signifi-cantly outperformed their tradit
46、ional investment-grade coun-terparts.For example,our account held SCHP,the Schwab U.S.TIPs ETF,which returned 1.72%per annum.Municipal bonds were a large contributor for both Schwab portfolios,helping performance modestly surpass their taxable-aggre-gate counterparts.Select Schwab ETFs/Indices 3-Yea
47、r Trailing Annualized Return as of 3/31/23 Schwab Fundamental U.S.Large Co ETF23.18%S&P 500 Index18.58%Schwab Fundamental U.S.Small Co ETF25.19%Russell 2000 Index17.48%Schwab Fundamental International Large Co ETF17.59%MSCI EAFE Net Total Return USD Index13.66%Congratulations to Wealthfront,Zacks,an
48、d Fidelity Go on a Stellar 5-Year Track RecordAt the Robo Report,we have accumulated 5-year track re-cords for many top robo advisors.Our Wealthfront(2016 Vin-tage),Zacks,and Fidelity Go accounts were the top three performers versus their Normalized Benchmark for the 5-year period ending March 31,20
49、23.We share our congratulations with these robo advisor providers while looking under the hood to see if trends in these accounts success could be repeatable.Our winning portfolio,Wealthfront(2016 vintage),has had its relative performance substantially boosted thanks to the energy allocation,as ment
50、ioned in the previous sections.Ad-ditionally,when reviewing the equity portfolios,Wealthfront and Zacks demonstrated a notable domestic bias.Zacks,for example,has roughly 85%of its equity portfolio in U.S.stocks,while Wealthfront holds 72%of stocks domestically.This difference was important for perf