On Thursday, Fidelity Investments announced the launch of two all-ETF model portfolios intended for wealth management firms seeking assistance in navigating the expanding range of funds to build client portfolios.
These portfolios include a mix of active and passive exchange-traded funds with various investment strategies, incorporating Fidelity ETFs as well as those from other providers. The Fidelity Target Allocation ETF Model Portfolios feature a diversified multi-asset class model, whereas the Fidelity Target Risk ETF Model Portfolios include liquid alternative investments to complement the core model.
In recent years, these model portfolios have largely replaced products like fund of funds, with approximately 85% now offering open architecture, according to analyst Matt Apakarian from Cerulli Research.
Apakarian noted that asset managers aim to attract advisors to their firm, platform, and products, while ETF issuers are increasingly focused on creating products that appeal to those building these models. By the end of 2024, the U.S. market alone had close to 4,000 separate ETFs available.
Fidelity mentioned that the selection of ETFs for its customizable model portfolios more than doubled over the two years leading up to December 2024. A survey by State Street Global Advisors revealed that financial planners managing over $5 billion reported allocating 39% of assets via models, up from 32% three years earlier.
The adoption of customizable model portfolios has seen rapid growth, with assets invested in these products skyrocketing by 50% in a 15-month period ending in September 30, 2024, to reach $125 billion, as reported by Morningstar.