Privacy, please.

Fidelity is making a bet that’s what advisors want, at least in terms of the models they use. Last week, the company rolled out two new lines of model portfolios that incorporate alternatives, including private equity, private credit and private real estate. Both of the options use interval and tender-offer funds for the private markets exposure, though one version is built primarily with mutual funds and the other with ETFs.

Interest in private markets has jumped over the past year, though recent cracks in private credit could be dampening that momentum. Still, advisors may want simple ways to sprinkle private assets into clients’ portfolios (survey data shows nearly half are, according to the company). “These new additions to our suite of turnkey models provide advisors the tools they need to offer private markets exposure at scale,” Amanda Robinson, Fidelity’s head of wealth advisory managed solutions specialist division, said in an announcement.

But Let’s Not Use ETFs

About a third of US investors with professionally advised assets say they prefer to have model portfolios built by advisors, per data from consumer-research firm Hearts & Wallets. And among households with at least $10 million to invest, 28% have assets in private equities.

There are only a handful of private-asset ETFs on the market, and the exposure those offer to the category are minimal, given the liquidity requirements of exchange-traded funds. Fidelity’s model portfolios don’t use funds such as State Street’s Public & Private Credit ETF (PRIV), the Baron First Principles ETF (RONB) or the ERShares Private-Public Crossover ETF (XOVR), the latter two of which include SpaceX among their primary holdings. Interval funds and tender-offer funds remain the more practical ways to get exposure to private markets.

A look at Fidelity’s new ETF model portfolios:

• There are five risk profiles ranging from conservative to aggressive.
• The three private funds are the Cliffwater Corporate Lending Fund, StepStone Private Equity Strategies Fund and Clarion Partners Real Estate Income Fund. Allocations to the first two range from 9% to 2% and from 3% to 12%, respectively, as portfolios increase in risk levels. The allocations to the real estate fund are 3% for each, regardless of risk level.
• The models are available through Envestnet, but will be added to other platforms later this year. Fees range from 72 to 77 basis points, and the minimum investment is $100,000.

Model Behavior: Alternatives have increasingly made their way into model portfolios. T. Rowe Price and Goldman Sachs recently paired up for a line of five model portfolio options that include a mix of funds from each shop, with a high-net-worth portfolio that includes alternatives becoming available later this year. CAIS Group and iCapital have also launched model portfolios featuring alts. “That certainly shows where the market is headed,” said Pat Newcomb, relationship manager at Fuse Research Network. “We’re going to see more private-markets funds, whether they’re interval funds or tender-offer funds, being incorporated into these models.”

A quirk of the expansion of alts in models is rebalancing, as interval and tender-offer funds have limited redemptions, he noted. Fidelity’s new models, for example, reallocate semiannually. Advisors should consider when evaluating any of the options whether the private-markets weightings are substantial enough to make a noticeable difference on returns, he said. “There are a lot of advisors that don’t have time or ability to understand the alternatives marketplace,” he said. “That’s why these companies are offering [easy] access.”

If a $3.6 billion mutual fund converts to an ETF in the forest, does it make a sound?

The Sequoia Fund, a somewhat concentrated product that has struggled for years with performance and outflows, is doing just that. The investment team behind the fund, Ruane Cunniff, disclosed the pending change in regulatory filings Monday. The decision has a lot to do with taxes, the company said in letters to mutual fund and separately managed account clients.

“Once the conversion is complete, taxable investors in the Sequoia ETF should be able to defer the realization of all, or nearly all, taxable gains for as long as they maintain their investment in the ETF,” the letter read.

Complicated History

The switch reflects the mass movement of assets out of mutual funds (particularly actively managed ones) and into ETFs, said Dan Sotiroff, associate director of ETF and passive strategies research at Morningstar. But in the Sequoia Fund’s case, the tax issue is pretty big: About half of its assets appear to be from capital gains, he noted.

The fund, which has one share class, has also seen better days. It was at the center of litigation brought by retirement plan participants about 10 years ago over Sequoia’s high allocations to Canadian drugmaker Valeant Pharmaceuticals, which imploded and suffered severe losses. One case brought by DST Systems profit-sharing and 401(k) participants resulted in Ruane Cunniff (formerly Ruane, Cunniff and Goldfarb) paying tens of millions in settlements, though fiduciaries in a separate case involving the Walt Disney 401(k) defeated a similar lawsuit. The Sequoia Fund looks different today, and its single biggest allocation is to Rolls Royce, representing nearly 13% of its portfolio.

But since the beginning of 2015, the fund has struggled with performance, and some investors pulled their money, Sotiroff noted:

• Over 134 months, only three had net inflows.
• Investors redeemed a total of about $6.5 billion in assets.
• Performance has lagged the market and the fund’s Morningstar category, though it did better in 2018, 2021 and 2025, returning over 22% last year.

A Choice to Make: All of the mutual fund’s shares will be moved to the ETF later this year, though clients in the SMA strategy can choose whether they want their assets placed in it. It’s unclear whether many retirement plans include the mutual fund, though if they do, it would be unlikely that they could remain invested, given that ETFs are generally incompatible with 401(k)s. One wrinkle in moving from a mutual fund to an ETF structure is that the latter cannot place restrictions on new investments, Sotiroff said. “If they were to run into capacity issues down the road, they would lose that ability to close the fund to new investors.”

The heart wants what the heart wants. And a lot of hearts apparently want ETFs.

The use of exchange-traded funds among advisors and investors continues to grow, becoming the primary way many of them build portfolios, two recent reports show.

“This year’s data suggests the ETF market is entering a more mature phase,” a paper late last month from AdvizorPro stated. “Advisors are still adding new funds and exploring new strategies, but allocations are becoming more deliberate, more diversified and increasingly tied to specific portfolio roles.”

More Is More

The average number of ETFs used by RIAs rose from 78 to 88 from the fourth quarter of 2024 through the fourth quarter of 2025, a 14% increase, that report found. More than 70% of RIAs indicated they added more ETFs. Advisors also appear to be more comfortable with the ETFs they have chosen, with turnover declining from nearly half of holdings in 2024 to about one third in 2025, according to the data across more than 4,000 RIAs.

But they also like what’s new, a separate report last week from Brown Brothers Harriman found. All but 1% of the RIAs and big investors the firm surveyed globally said they would consider buying private assets in the ETF wrapper, and 82% said they’d buy the ETF share class of a mutual fund. Over 60% indicated they plan to increase the number of ETF issuers they choose for portfolios, and in the US, 98% of investors said they plan to hike their use of ETFs.

RIAs are also picking up ETFs from newer entrants to the market, another report last week from AdvizorPro shows:

• Tom Lee’s Fundstrat (home to the Grannyshots ETFs) saw the number of RIAs using the funds increase by 173% last year (from 78 to 213).
• RIAs using NEOS Funds, which focus on options-based income ETFs, increased by 134% (going from 221 to 518).
• Some of the larger, more established firms also ramped up their RIA footprint significantly, including Virtus, Calamos, BlackRock, Morgan Stanley and Putnam.

What’s Next: Did anyone else notice that the VIX is up 67% year to date? “2026 will be the year of defined outcome ETFs,” BBH global head of ETF product John Hooson wrote in that firm’s report. “Although many prognosticators see the S&P appreciating by the end of the year, the path to get there may include pronounced periods of volatility.”