Emerging Markets Exposure
Advisors now have greater flexibility in how they deliver international equity exposure to clients. Prior to this release, Seeds offered developed international (ex-US) exposure through separately managed accounts (SMAs) using American Depository Receipts (ADRs). Now, advisors in addition have access to emerging international exposure through SMAs of ADRs across 23 emerging market countries. The Seeds platform now presents initial proposals that include a split between developed (19%) and emerging international (6%) stocks based on each investor assessment. Advisors can still edit and control these exposures for each client.
Liquid Alternatives Exposure
We recognize that many advisors seek alternative investments for certain investors in order to better diversify portfolios through exposures less correlated to traditional asset classes. However, many advisors have shared with us continual challenges they often face in delivering such options. Those include:
Sourcing & Allocating: Advisors consistently share with us the challenges they face in sourcing deals across private equity, private credit, real estate, hedge funds, etc. While firms may utilize alternative investment marketplaces, determining which specific funds to choose–and how to diversify across funds–remains a burden.
Liquidity Constraints & Minimums: Certain alternative investments are illiquid and have long lock-up periods, which may conflict with or complicate the investor’s overall financial plan. These investments often also have high minimum investment requirements, which can limit access for some clients.
Complex Implementation: Alternative investments often require extensive and complex documentation, including subscription agreements, offering memorandums, private placement memorandums, and more. Advisors must also stay current with regulatory changes and ensure that all paperwork is compliant.
We have launched a global liquid alternative strategy to address these challenges while enabling advisors to provide less-correlated returns relative to traditional equity markets. After an advisor completes an assessment with an investor client, the Seeds platform will default a 0% allocation to this new strategy. However, advisors can use the edit module to add a percentage weight at their discretion.
This new exposure uses mutual funds and exchange traded funds (ETFs) within SMAs that include alternative strategies across equity, fixed income, currency, and commodity asset classes. The strategy seeks to enhance the overall performance of a diversified portfolio by reducing volatility and providing downside protection.
Asset Classes
- Equity: Includes long/short equity strategies to exploit both bullish and bearish market conditions.
- Fixed Income: Incorporates both traditional fixed income securities and alternative strategies like market neutral and risk parity to manage interest rate risks and achieve stable returns.
- Currency: Utilizes currency trading strategies to capitalize on global macroeconomic trends and relative currency strength.
- Commodities: Invests in commodities to hedge against inflation and provide a non-correlated asset class.
Typical Strategies
- Long/Short: This strategy involves taking long positions in undervalued assets and short positions in overvalued assets, aiming to profit from relative price movements and reduce market exposure.
- Risk Parity: Allocates assets to balance the risk contribution of each asset class, promoting diversification and risk management.
- Market Neutral: Focuses on generating alpha through security selection while maintaining a market-neutral stance to minimize systemic risk.
- Merger Arbitrage: Engages in arbitrage opportunities arising from mergers and acquisitions, seeking to capture the spread between the acquisition price and the current market price.
- Global Macro: Capitalizes on macroeconomic trends by making directional bets on equity indices, interest rates, currencies, and commodities.
Risk Management
- Diversification: Spreads investments across multiple asset classes and strategies to mitigate the impact of any single market event.
- Dynamic Allocation: Adjusts the allocation based on market conditions and the relative attractiveness of each strategy.
- Monitoring and Rebalancing: Regularly reviews portfolio performance and risk metrics, rebalancing as necessary to maintain the desired risk profile and strategy effectiveness.
Expected Outcomes
- The Global Liquid Alts Model aims to deliver
- Enhanced risk-adjusted returns compared to traditional portfolios.
- Reduced volatility and drawdowns during market stress periods.
By integrating a diverse set of alternative strategies and asset classes, the strategy can provide a robust framework for achieving stable and uncorrelated returns in a global investment landscape.
Comparison of return and beta with equity, fixed income, and blended benchmarks
For example, if we calibrate a blended equity/fixed income model to match the Seeds Liquid Alts model 10-year performance, we get roughly 40% S&P 500 and 60% Agg. The beta (relative to the S&P 500) of this blend is 0.41 compared to a beta of 0.16 for the Seeds Liquid Alts model, indicating that the Seeds model can achieve comparable returns to the blend, but with higher diversification. Used to supplement a diversified global equity and fixed income portfolio, this can potentially improve the reliability of outcomes.
If you’re a current user of the Seeds platform and would like to learn more about these new offerings, reach out to support@seedsinvestor.com
If you’re looking to get started, reach out to hello@seedsinvestor.com or set up time to speak with us here.
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