MARTINSVILLE, N.J., April 26, 2018 /PRNewswire/ -- The 7th Edition of The Robo Report™, the first and only report on the performance and portfolios of robo advisors in the digital advice industry, published by BackEnd Benchmarking, has been released for the first quarter of 2018.
"We've been building data on robo advisors for a couple of years during the continued bull market. We were quite curious to see how they performed and functioned during a down or prolonged bear market," said Ken Schapiro, Founder of BackEnd Benchmarking. "From a performance standpoint they held their own as expected from a passive investment return perspective. However, there were widespread outages at not only standalone robos, but also big financial institutions where we would have expected the infrastructure to handle the volume of website traffic. Investors could not get access to their accounts for a period of time."
"There are also important takeaways from this new report. As the robo advice industry matures, robos are finding it necessary to add features and offerings to differentiate themselves and display a clear value proposition. The combination of Overstock.com launching a robo advisor and news that Amazon was considering venturing into banking sparked a discussion about whether Amazon, or others, will try and enter the investment advice industry."
Robo Report Q1 2018 Takeaways
Large allocations to emerging markets has paid off in both the short and long run. SoFi, SigFig, TD Ameritrade, and Schwab all have higher than average emerging markets exposure which has helped their outperformance.
Portfolio's with more diverse types of bonds have outperformed. In particular international bonds set many portfolio's fixed income apart. Schwab has two international bond funds. SigFig and FutureAdvisor also contain international bonds and their fixed income portfolios have done well in the short and long term.
High-Yield bond funds have also helped portfolios outperform as investors' confidence stays high. Schwab and SoFi both benefited from this trend.
SoFi led the group this quarter. Their large emerging markets exposure helped them this quarter in equities. A vast majority of the fixed income is allocated to a single high-yield municipal bond fund which did well. The remaining fixed income is in an emerging markets bond fund. This fixed income allocation to only high-yield municipals and emerging market bonds is unusual within our universe.
Portfolios with active funds benefitted from them. T Rowe Price, Wells Fargo, United Income, and Hedgeable all benefited from either active management or holdings with actively managed funds.
The Report has more than full two years of performance return numbers for robo advisors at Betterment, SigFig, Schwab, Vanguard, Personal Capital, WiseBanyan, and Acorns. In addition, the Report covers Ally Financial, Ellevest, E*Trade , Fidelity Go, FutureAdvisor, Hedgeable, Merrill Edge, SoFi, TD Ameritrade, TIAA, T. Rowe Price, Wealthfront, WealthSimple, and Zack's Advantage.
This quarter, it introduced three Socially Responsible Investing (SRI) portfolios to the report from TIAA, Betterment, and Morgan Stanley, while also publishing results for the first time from Morgan Stanley, Wells Fargo, USAA, United Income, and Capital One. Next quarter the publisher will be introducing SRI portfolios from WealthSimple and Hedgeable.
The new report includes a conversation with founder of Acorns about the power of first-time investors and United Income's innovative product aimed at the wealthiest generation.
Alongside reporting performance, The Robo Report™ includes a discussion on the trends during the quarter that drove performance as well as a news section covering recent industry events.
The Report ranks the top three Robos by quarterly performance in Equity, Fixed Income and Total Portfolio as well as historical performance since each accounts' inception.
To get a first-hand understanding of how the providers operate and invest, BackEnd Benchmarking opened and funded portfolios seeking a similar asset allocation to allow for comparison. The knowledge of the underlying assets held helps to understand the structure of the portfolio, the risk, and what is driving performance.
This report represents BackEnd Benchmarking's research, analysis, and opinion only; the period tested was short in duration and may not provide a meaningful analysis. There can be no assurance that the performance trend demonstrated by robos vs. indices during the short period will continue.