Fidelity Investments will now offer alternative investments as options for its custom model portfolios for RIAs and broker/dealers.
Fidelity Custom Model Portfolios will allow advisors to combine traditional investment options alongside private market investments. Fidelity will use interval funds, tender offer funds, mutual funds and ETFs to gain the private market exposures. The company also uses an open-architecture approach to give clients access to Fidelity’s and third-party managers’ investment vehicles.
The custom model portfolio is now available through Envestnet’s wealth management platform, and Fidelity will evaluate the possibility of expanding it to other platforms in the future, according to Amanda Robinson, head of wealth advisory managed solutions distribution with the firm.
Fidelity decided to launch the tool after seeing consistent demand from financial advisors for private market exposure in their models, she said. For example, a recent Fidelity survey found that 46% of surveyed financial advisors were very interested in a model portfolio that combines traditional and alternative investment options.
“Since 2018 [when Fidelity launched its first turnkey model portfolio], we’ve learned a lot about what advisors are interested in, and there are two things that jump out,” Robinson said. “One is open architecture, so offering a diversified portfolio with different managers, and the second one is meeting them where they are—working with them on whatever platform they are utilizing. With that said, we’ve heard consistent demand from our custom model portfolio business to include products like tender and interval funds.”
Robinson declined to name which third-party asset managers will be available to use in the custom model portfolios, noting that the selection relies on research from the Fidelity Institutional Wealth Adviser team, which applies quantitative and qualitative analysis for manager selection. She said that Fidelity will work with financial advisors on a case-by-case basis to determine which alternative asset classes might best fit in their portfolios.
“For now, we are focused on exposure to private markets,” she noted.
Launches of custom model portfolios with private market options have exploded over the past year. Recent research from Morningstar shows that custom model assets have jumped by almost 50% from June 2023 to September 2024, as client demand has grown.
Among asset managers that have launched custom models with alternative investment options recently are Goldman Sachs and BlackRock.
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