Charles Schwab's Schwab Intelligent Portfolio was the best performing robo-advisor in the third quarter, with its model portfolio for taxable accounts outperforming similar portfolios of 19 other robo-advisors, according to a new analysis by Backend Benchmarking.
Backend Benchmarking publishes The Robo Report, which tracks the performance of the leading robo-advisors each quarter, looking at how these computer-generated advisors perform when advising high-tax bracket stock/bond portfolio investors. It found that The Charles Schwab Corporation's (SCHW) model portfolio for taxable accounts gained 3.97% during the three months that ended in September.
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Betterment, the competing robo-advisor, was in second place, followed by SigFig and SoFi, which were tied for third place. For one year, SigFig and SoFi were in the lead with returns of 11.97%, while Schwab was right behind them with 11.93% returns. For two years, Schwab's returns are 25.94%, compared with the Betterment portfolio's returns of 21.89%, Backend Benchmarking found.
According to Backend Benchmarking, which is aiming to bring transparency to the investment management industry, Schwab Intelligent Portfolio ended the third quarter with close to $20 billion in assets, placing it in second place in terms of robo-advisors. Still, its assets pale in comparison to those of Vanguard's Vanguard Personal Advisor Services, which Backend Benchmarking said stood at $83 billion at the end of the third quarter. Betterment has more than $10 billion in assets.
Schwab Intelligent Portfolio is also an outperformer when it comes to its fixed-income portfolio. Year to date, it has a return of 6.01%. E*TRADE is in second place with fixed-income returns of 4.62%, while Fidelity Investments' Fidelity Go is in third place with year-to-date returns of 4.59%.
According to Backend Benchmarking, when it comes to analyzing robo-advisors, performance and risk go hand in hand. After all, if investors don't understand the risks associated with their investment, they could be in for a big shock if the portfolio becomes volatile. The firm found that the Schwab model portfolio was the least risky based on its standard deviation and its Sharpe ratio. Still, the firm said that it is reserving judgment on the portfolio's risk to see how it performs when the market is in a downturn. After all, Backend Benchmarking said that the Schwab's portfolio is "heavily invested in historically riskier assets" such as international and high-yield bond funds.