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Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC. 
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Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.
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Ways to Invest Your Assets

Now that you’ve been introduced to the different asset classes, it’s important to become familiar with specific managed investment vehicles. These are products that offer investors access to professional investment management across the different asset classes. Typical managed investment vehicles include:

Mutual funds

This vehicle pools money from multiple investors to purchase securities such as stocks, bonds, and/or money market instruments. As an investor in a mutual fund, you have what’s called a “pro rata interest” in the pool of securities, as opposed to directly owning individual securities or stocks. Each fund is a portfolio of a number of securities built around a specific asset class or investment objective—such as "U.S. stocks" or "long-term growth."

Pros

  • Presents a convenient opportunity to invest in a diversified portfolio of securities
  • Professionally managed to stated investment objectives
  • Can purchase or sell daily, typically with one business day settlement, at the fund’s net asset value (NAV), calculated at the end of each day

Cons

  • Professional managers charge an advisory fee, and funds incur various administrative expenses
  • Depending on the fund, you may incur sales and/or redemption charges
  • Individual investor has no control over the fund’s portfolio
  • Capital gains taxes can be incurred, even if you haven’t sold shares

Exchange-traded funds (ETFs)

ETFs are traded on stock exchanges and typically track an index. They invest in securities intended to track the returns of stocks, commodities, bonds, or other assets, such as foreign currencies. The popular S&P 500 Index, for example, is the underlying (“reference”) index for a number of ETFs.

Pros

  • Tax efficient
  • Daily trade liquidity (two- or three-day settlement)
  • Typically have lower fees than most mutual funds in the same asset class
  • Quick way to access a diversified portfolio of securities

Cons

  • Shareholders don’t directly own the underlying investments
  • Pursuing index returns means no intent to seek excess return—an ETF meeting its objective would return the benchmark rate minus fees and expenses

Separately Managed Accounts (SMAs)

Like pooled investment vehicles, such as mutual funds and ETFs, SMAs are portfolios managed by a professional investment manager. Unlike pooled investment vehicles, the investor maintains the account and directly owns the portfolio securities.

Pros

  • Shareholders directly own the underlying investments
  • May offer an opportunity for custom tax treatment, as investors have their own individual cost basis
  • Investors can contribute existing holdings into the portfolio instead of only investing cash
  • Customized, professional portfolio management, including restrictions on security types (industries or sectors) as well as individual securities

Cons

  • Minimum investment amounts, commonly $100,000 and higher, may require a material commitment to access a given asset class or strategy
  • Diligent research is key, as individual managers are not required to file prospectuses, yet understanding strategies and implementation is important to matching managers to your particular objectives

Private Funds

This vehicle basically describes any non-publicly traded business structure that pools together the capital of many investors in a manner comparable to a mutual fund. The most common structures are limited partnerships and limited liability companies. The daily management for these is the responsibility of the general partner or managing member, and investors take the role of limited partners or members, respectively.

Pros

  • May offer advantageous tax treatment, particularly compared to mutual funds
  • The less-liquid structure and absence of regulatory investment restrictions applicable to mutual funds allows the investment manager to employ leverage, use derivatives, and invest in illiquid assets, which may offer additional diversification and opportunities for excess return
  • Allow for investments in strategies reserved for sophisticated investors
  • Provide access to talented managers drawn to the freedom to transact in a variety of markets

Cons

  • Liquidity may not be offered, or may be limited, including notification periods, lockups, and gates
  • Potential exposure to investment risks in addition to broad exposure to securities markets, such as sector concentration, derivatives, and/or leverage
  • Low or no transparency of portfolio holdings
  • Due diligence in the segment is particularly complex given the range of strategies and potential terms, as well as the private nature of the offerings
  • Investors receive a K-1 for a tax document, which is more complicated, and some partnerships do not have their tax documents available before the April 15th deadline, requiring an extension

Contact

To determine how Wealth Compass can help meet your objectives, please contact Senior Investment Advisor Will Bennett, Senior Investment Advisor Lara Coviello, or your Wilmington Trust advisor.

Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank, member FDIC.

This commentary is provided for educational purposes only, providing a high-level introduction to investing concepts and terminology. It is not intended to provide all of the nuances of strategies that may be available in the marketplace; thus descriptions of features, risks, and potential benefits are intended to be generally representative and not comprehensive. Similarly, this material is not intended as an offer, recommendation or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the investor’s objectives, financial situation and particular needs. The investments or investment strategies discussed herein may not be suitable for every investor. There is no assurance that any investment strategy will be successful.

Third party information incorporated into these materials has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Opinions, estimates and projections constitute the judgment of Wilmington Trust and are subject to change without notice.

Investors should consider the investment objectives, risks, charges and expenses of an investment company carefully before investing. The prospectus contains this and other information about an investment company and is available from your financial advisor. The prospectus should be read carefully before investing.

Investment products are not insured by the FDIC or any other governmental agency, are not deposits of or other obligations of or guaranteed by Wilmington Trust, M&T, or any other bank or entity, and are subject to risks, including a possible loss of the principal amount invested. Some investment products may be available only to certain “qualified investors”—that is, investors who meet certain income and/or investable assets thresholds.

Wilmington Trust is a multi-faceted financial services company offering a broad range of services, including financial services and investment products provided by affiliates. While offering affiliated products and services in client solutions generally is intended to ensure a cohesive client experience, certain inherent conflicts of interest exist. These include, where applicable, the general incentive of expanding the firm’s brand and presence in certain markets, including assets under management as well as the incentive of incremental service fees, advisory or management fees, administrative fees and, in some cases, sales or incentive fees. The use of affiliate products and services could introduce a conflict of interest in future recommendations where such recommendation might involve products and services where Wilmington Trust and its affiliates collectively earn less in fees.

Emphasis on qualitative factors in the manager selection process is likely to result in the availability of investment strategies managed by affiliates of M&T Bank on our service platforms, and may influence specific recommendations. In many instances, the use of such affiliate offerings can result in additional revenues to M&T Bank or the affiliate as compensation for investment management, execution, administration, or other services.

Investing involves risks and you may incur a profit or a loss.

Diversification does not ensure a profit or guarantee against a loss.

Past performance cannot guarantee future results.

Third-party trademarks and brands are the property of their respective owners.

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