In constructing portfolios for purchasers, monetary advisors are leaning into massive cap group home equities, developed markets for worldwide equities, high-yield bonds in fixed-income allocations and liquid options as a volatility buffer whereas more and more utilizing ETFs as a wrapper for these methods.
That’s based on the most recent evaluation from Constancy’s portfolio building group primarily based on evaluation of three,198 advisor-managed portfolios from April to June 2025.
“For the near-term, fundamentals look robust, akin to company earnings. The one uncertainties are coverage uncertainty in addition to the constant threat of inflation,” mentioned Mayank Goradia, head of portfolio building at Constancy Investments. “It reinforces the necessity for diversification and self-discipline and commonly reviewing and understanding what’s inside portfolios. … Advisors are cautiously optimistic. They’re leaning into progress however maintaining one hand on the brake.”
Not surprisingly, ETF utilization continues to develop. General, Constancy discovered 64% of incoming portfolios had some allocation to ETFs, and, on common, almost 50% of advisor portfolios are allotted to ETFs.
Advisors are most closely counting on ETFs for U.S. fairness publicity—with 72% utilizing ETFs for these allocations, almost equal to 77% that use mutual funds in that asset class. For worldwide equities, nevertheless, simply 42% of advisor portfolios use ETFs vs. 78% that use mutual funds.
As well as, use of lively ETFs continues to develop, with 36% of advisors utilizing lively ETFs vs. 13% in 2022. The common allocation to lively ETFs was round 22%. The vast majority of flows into lively ETFs have been within the home large-cap house.
“Flows are going to comply with the maturity of the merchandise—the monitor file and the pedigree,” Goradia mentioned. Energetic ETFs within the home massive cap house have been round longer than in different classes and have extra of a monitor file. Mounted-income methods have been subsequent within the lively ETF growth pipeline, and flows are choosing up there now as properly, Goradia mentioned.
Constancy discovered that general common advisor portfolios are 70% allotted to equities. Of that, 79% is allotted to U.S. shares vs. 21% for worldwide vs. a mixture of 73% to 27% in 2021.
Inside U.S. fairness, the common portfolio features a 65% allocation to large-caps, 22% to mid-caps and 13% to small caps. By fashion, progress equities got here in at 28%, worth at 29% and 43% to core.
For non-U.S. equities, advisors had 84% of their allocations in developed markets and 16% in rising markets. Non-U.S. equities have ridden some tailwinds in 2025, together with a weakening greenback, secure fundamentals and powerful earnings, and a tilt towards financial easing insurance policies outdoors the USA. Tariffs, nevertheless, signify a headwind to extra trade-reliant economies, significantly in rising markets.
Mounted-income allocations stood at 25% of advisor portfolios, based on Constancy. Of that, 79% is allotted to investment-grade bonds and 21% to high-yield bonds.
“Bonds are again, not simply as a stabilizer however as an income-producing engine,” Goradia mentioned. Allocations are additionally going for shorter period of late. “It has to do with talks about when the Fed begins reducing charges. Advisors are underweight fixed-income, however have sufficient allocation to funding grade and are supplementing it with high-yield and that’s reducing into the common period.”
As well as, with increased correlations between bonds and equities, advisors have sought diversification by liquid options. General, Constancy discovered that 11% of incoming portfolios had an allocation to liquid alts, with the preferred classes together with hedge fairness and market-neutral merchandise.
“In a world the place shares and bonds transfer collectively, alts are the brand new shock absorbers,” Goradia mentioned. “We’ve by no means seen this a lot significance given to diversification. Diversification isn’t nearly spreading threat, however about constructing resilience and avoiding uncertainty.”
In all, Constancy mentioned that of advisors utilizing its portfolio building companies, about two-thirds come again on a periodic cadence, participating between two and 10 instances per 12 months. “They arrive again ever three months or six months to verify they nonetheless be ok with their exposures.”
