Webull details mechanics behind managed portfolio launch

Investing.com -- Webull's new managed bond portfolios hold individual positions as small as $100 per CUSIP, against a traditional market where reasonable execution typically requires upwards of $10,000 per position, the company recently told Investing.com.

Webull announced in late July that it has cut the account minimum for a professionally managed individual bond portfolio to $500, from an industry norm above $250,000.

The platform’s head of fixed income Matt Peterson detailed the mechanics of the move in comments to Investing.com following the product's launch and ahead of Webull’s quarterly results on Aug. 19.

Typical minimums in the traditional bond market run above $10,000 per position for reasonable execution, which has historically forced high account minimums on any diversified fixed income portfolio.

However, Webull's new structure sets a minimum holding size of $100 per CUSIP, with $1 increments thereafter.

That Webull Enhanced Cash strategy carries a $500 minimum and a 0.15% annual fee, and can hold five to 15 individual Treasury CUSIPs. The High Income strategy, with a $2,000 minimum and a 0.30% fee, spans 20 to 50 corporate bond positions with high-yield exposure capped at 49%. Both strategies carry a $1 monthly fee minimum.

“With minimum holding sizes of just $100 per CUSIP, investors can achieve a level of diversification and oversight with just a few thousand dollars that would typically be reserved for $250k+ accounts,” said Peterson.

Portfolio construction is algorithmic, with oversight from the Webull Advisors Investment Committee, running to credit minimums, duration targets, concentration limits and daily compliance monitoring. Every eligible bond must clear a retail liquidity screen, also monitored daily.

"Traditional bond SMAs require a portfolio manager for hand-selecting bonds per account," Peterson said. "These economics only work at $100k–$250K+ minimums."

He pointed to changes in the underlying market as the enabling factor.

"Over the last 5 years the bond market has seen dramatic structural and technological improvements that have led to a material shift toward individual bond ownership," Peterson said at launch. "However, many retail investors still don't have the time, knowledge, or desire to build these portfolios on their own."

Better retail liquidity data and execution mean small trades can now clear without the wide markups that historically penalized retail bond buyers, according to Peterson.

The two strategies were built around customer demand for higher-yielding cash management options and for diversification capable of reducing drawdown during a pullback without sacrificing too much return, he said.

“Webull’s typical customer skews younger and lower net worth than the average bond investor, so these portfolio strategies were created with those investors in mind,” Peterson stated.

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