**Cerulli: Model Portfolios Rise, Funds Of Funds Decline**

Tecfai Editorial Team

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Post on Nov 14, 2024

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Cerulli: Model Portfolios Rise, Funds of Funds Decline

The investment landscape is constantly evolving, and with it, the strategies employed by investors. Recent research by Cerulli Associates reveals a fascinating trend: model portfolios are gaining traction, while funds of funds are experiencing a decline in popularity.

This shift highlights a growing preference for transparency, customization, and cost-efficiency in portfolio management. Let's delve into the key findings and understand the factors driving this dynamic.

The Rise of Model Portfolios: A Shift Towards Customization

Model portfolios are pre-designed investment strategies that offer a curated mix of assets aligned with specific investment objectives and risk profiles. Their popularity is on the rise due to several compelling factors:

• Customization: Model portfolios allow investors to tailor their investments to their unique financial goals and risk tolerance.
• Transparency: The underlying assets and strategies are clearly defined, offering greater visibility into the portfolio's composition.
• Cost-effectiveness: Model portfolios often come with lower fees compared to traditional funds of funds, making them an attractive option for cost-conscious investors.
• Accessibility: Model portfolios are increasingly available through various platforms, including robo-advisors and online brokerages, making them accessible to a wider range of investors.

Funds of Funds: Facing Headwinds in a Changing Landscape

Funds of funds were once considered a convenient way to diversify across multiple asset classes and managers. However, their appeal has waned in recent years due to:

• Higher fees: Funds of funds typically carry multiple layers of fees, eroding returns for investors.
• Lack of transparency: The underlying funds within a fund of funds can be complex and difficult to understand.
• Performance concerns: Funds of funds haven't always delivered consistent returns, raising questions about their value proposition.

The Future of Investment Strategies

The growing popularity of model portfolios suggests a shift towards a more personalized and transparent approach to investing. Investors are increasingly seeking strategies that align with their individual needs and provide greater control over their investments.

While funds of funds may still have a role to play in certain situations, their future appears less certain. As investors continue to demand greater transparency and cost-efficiency, model portfolios are likely to continue gaining ground in the evolving investment landscape.

Key Takeaways:

• Model portfolios are gaining traction, driven by factors such as customization, transparency, cost-effectiveness, and accessibility.
• Funds of funds are facing headwinds due to higher fees, lack of transparency, and performance concerns.
• The shift towards model portfolios suggests a growing preference for personalized and transparent investment strategies.

This research from Cerulli offers valuable insights into the evolving investment landscape. By understanding the trends shaping the market, investors can make more informed decisions about their investment strategies.