Axios: Custom Bond Portfolios Move Downmarket
In a recent article, Ryan Lawler of Axios examines a shift happening in the world of fixed income investing. For years, building a custom bond portfolio meant dealing with high minimum investments, manual processes, and exclusive access for only the wealthiest clients. However, times are changing. Tools like those developed by IMTC are making it possible for a broader range of investors to tap into tailored bond strategies that were once out of reach.
The story highlights IMTC’s recent $12 million Series A raise, co-led by Lord Abbett, which draws attention to the rising demand for digital solutions in the bond market. IMTC’s platform gives asset managers the means to construct and trade personalized bond portfolios more efficiently, minimizing the manual labor and complexity that have long kept costs—and minimums—so high. Automation is taking the place of the spreadsheets and daily matching exercises that used to define this segment.
Custom municipal separately managed accounts (SMAs) have seen their footprint grow dramatically, with assets surging from roughly $100 billion in 2008 to about $1.2 trillion today, according to Cumberland Advisors. Why do high earners gravitate to these SMAs? Direct bond ownership provides tax-management opportunities, stronger control, and greater transparency. Investors can tailor their portfolios to specific sectors or municipalities, avoid certain issuers, and harvest tax losses in ways that pooled funds cannot accommodate.
Minimum investment requirements are shrinking, too. IMTC notes that its software can help clients lower SMA minimums from around $10 million to $100,000 in certain strategies. Platforms like Envestnet are reporting that diversified fixed income SMAs that once started at $500,000 are now beginning closer to $200,000. Despite this progress, the largest dollar benefits still flow to those with substantial taxable balances and significant tax obligations. Advisors also caution that very small accounts may behave differently during volatile periods and may not always see the same level of value.
Lawler suggests this democratization of custom fixed income management is well underway, but that the most significant opportunities still remain with investors who have the income, assets, and time horizons to take full advantage. Whether broader adoption will follow as technology matures is a question to watch.
To dive deeper into the full story, read Ryan Lawler’s original article on Axios.