Find out how your portfolios stack up
February 21, 2024
February 21, 2024
How do your portfolios stack up against your peers'? Learn what’s trending in the biannual report from Vanguard’s Portfolio Analytics and Consulting (PA&C) team. You can review the highlights of the year-end 2023 report here or download the full analysis.
Advisors’ allocations toward growth remain steady, but benchmark-relative active risk has increased for many advisor portfolios given changes in index composition. The persistent outperformance of mega-cap growth names in headline indexes has only pushed their weightings higher, further magnifying typical advisor underweights that our team has analyzed for years.
Our data shows a roughly 7% underweight in the median growth allocation at 32% of the overall equity sleeve compared to 39% for a global equity benchmark.
Three out of four advisors now meaningfully underweight growth
Fixed income continues to be an area of focus for most advisors who engage with our PA&C service. The historic spike in bond volatility experienced throughout 2022 and 2023 is top of mind for many advisors. It's no wonder why the median allocation to active bond funds exceeds 70% as advisors seek to outsource components of their fixed income management.
Given many active bond managers tend to underweight government bonds, advisors remain meaningfully overweight corporate bonds, which has persisted for quite some time. More recently, we have noticed a clear shift in our data that shows a 5% increase in the median government bond allocation, at 38% of the overall fixed income sleeve compared to 33% a year ago. In addition, we saw an increase in the usage of explicit government bond ETFs as higher risk-free rates attracted the attention of many advisors.
Although most advisors remain woefully underweight government bonds, we believe this is a solid step in the right direction. We caution against forgoing the diversification benefit that comes from pairing government bonds with credit sensitive securities, such as corporate bonds and equities.
Advisors continue to overweight cash, but most are underweight government bonds
Duration positioning remains one of the more popular topics we discuss with advisors as a team. Vanguard encourages advisors to get back to strategic duration weights as a way of preserving portfolio yields and diversification benefits for multi-asset-class portfolios. While advisors at large remain underweight duration, we have observed an encouraging directional trend in advisors’ duration positioning as it inches higher and advisors reallocate capital into intermediate duration and core bond strategies.
Three out of four advisors continue to underweight duration
Cumulative 2023 return for bonds by month
Use this detailed report on the portfolio construction choices your fellow advisors made in 2023 to inform your decisions as you work to improve outcomes for your clients.
Take the first step in validating your portfolio construction decisions, uncovering opportunities, and learning about Vanguard’s latest insights on the markets.
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