Performance Commentary

2025 Market Reversal

The 2025 robo-advisor account performance shows a reversal of the investment themes that drove success over the past decade. Strategies that dominated multi-year rankings now struggle with year-to-date performance, while approaches that languished in previous periods have advanced. The winning formula of domestic large-cap equity concentration combined with municipal bond allocations that generated sustained outperformance across multiple cycles has reverted, as international diversification and corporate credit exposure emerge as the new performance drivers this year.

Where SoFi, Fidelity Go, and Wealthfront built their eight-year leadership on concentrated domestic equity exposure and municipal bond stability, the platforms currently leading year-to-date performance, Interactive Advisors, Citizens Bank SpeciFi, and Citi Wealth Builder, have capitalized on the opposite positioning: higher international allocations and corporate credit strategies that were previously performance drags.

International markets, which underperformed U.S. equities over the past eight years, have inverted this relationship in 2025. Corporate bonds, which struggled against municipals in previous periods, now outperform tax-exempt strategies. The year-to-date equity leaders, Betterment Broad Impact SRI, Citizens Bank SpeciFi, and Betterment SRI, don’t even appear among long-term equity winners, highlighting how market dynamics have shifted.

International Exposure Drives Current Leadership

International markets have staged a comeback, reversing years of underperformance relative to U.S. equities. For the year-to-date period, the MSCI EAFE Index surged 19.94% and the MSCI Emerging Markets Index gained 15.52%, both significantly outpacing the S&P 500’s 6.20% return. Interactive Advisors benefited from its 46% international exposure, well above the robo-advisor average of 32%. Citizens Bank SpeciFi allocated 44% internationally, while Citi Wealth Builder held 36%. All top performers were positioned to capture the global equity rotation that has defined 2025.

The growth versus value disparity has compressed recently compared to longer-term patterns. For the year-to-date period, the Russell 3000 Growth Index returned 5.79%, only marginally ahead of the Russell 3000 Value Index’s 5.55%. This convergence meant Interactive Advisors avoided the typical drag of its 34% value allocation, while Citizens Bank SpeciFi and Citi Wealth Builder weren’t penalized for their more balanced allocations to both styles.

One trend that has not reverted is large-cap equities continuing their leadership over small-caps, with the Russell 1000 Index gaining 6.11% year-to-date versus the Russell 2000’s 1.79% decline. However, the performance gap has narrowed from previous periods. Citi Wealth Builder and Citizens Bank SpeciFi both allocated 74-75% to large caps, while Interactive Advisors held 67%, all benefiting from large-cap resilience.

Fixed Income Winners Shift from Municipal Bonds to Corporate Credit

The YTD fixed income leaders, Wells Fargo Intuitive Investor, Empower (Personal Capital), and Axos Invest, represent the mirror image of the eight-year winning strategies. Where trailing 8-year period winners like Fidelity Go succeeded with full municipal allocations, the current leaders have capitalized on corporate credit exposure as well as high-yield bonds.

Fixed income performance reflects a clear reversal from recent trends, with corporate bonds outperforming municipals for the year so far. The Bloomberg US Corporate Index gained 4.17% year-to-date, while the Bloomberg Municipal Index declined 0.35%, marking a stark contrast to municipal outperformance in prior years. Wells Fargo Intuitive Investor, leads in the strong performance of high-yield, with its 32% high-yield allocation through USHY, as seen with the Bloomberg US Corporate High Yield Index’s 4.57% YTD return. The bottom-performing fixed income performers, ETrade, Schwab Domestic Focus, and Merrill Guided Investing, suffered from heavy municipal bond concentrations.

Empower’s diversified approach through USIG (investment-grade corporate) and SHYG (short-duration high yield) has captured both duration and credit premiums. Axos Invest exemplifies the importance of corporate credit with its diversified approach with 13% in HYS (high-yield), 8% in LQD (investment-grade corporate), and strategic positions in TIP and various duration-targeted corporate bonds, while maintaining minimal municipal exposure.

The YTD leaders have captured credit risk premiums that the eight-year municipal winners largely avoided. The trailing eight-year period saw the Bloomberg US Corporate High Yield Total Return Index return 4.97% annually versus 1.88% for the Bloomberg Municipal Bond Index Total Return Index, yet most long-term winners maintained minimal high-yield exposure, suggesting a more conservative approach that worked previously but has proven suboptimal in 2025.

Strategic Discipline Versus Tactical Complexity in Fixed Income

The holdings data reveals that frequent portfolio adjustments don’t necessarily translate to superior performance. Since year-end 2021, Schwab Intelligent Portfolios demonstrated significant allocation shifts, dramatically increasing its municipal bond exposure through VTEB from 6.70% to 22.90% while eliminating TFI (from 10.12% to 0%), effectively concentrating its municipal allocation in fewer holdings. The platform also meaningfully expanded its international equity exposure, adding SPEM at 3.79% and increasing SCHF from 0.88% to 4.03%, raising total international allocation by nearly seven percentage points. Additionally, Schwab reduced its TIPS exposure through SCHP from 7.38% to 1.61% and eliminated its floating-rate allocation in SPIP entirely. Despite this active reallocation across asset classes and geographies, Schwab’s fixed income strategy delivered unremarkable performance over the eight-year period.

In contrast, the top performers like Axos Invest and Personal Capital made fewer adjustments, suggesting that disciplined rebalancing trumped active tactical shifts. Vanguard Personal Advisor, with minimal fixed income changes, delivered strong performance, reinforcing that strategic patience often outperformed tactical activity.

The holdings data also reveals a distinction between portfolio complexity and actual returns, suggesting that complex approaches may fail to justify their overhead. Schwab Intelligent Portfolios represents the most complex fixed income strategy in our study, deploying several specialized ETFs across emerging market local currency bonds (EMLC), intermediate treasuries (SCMB), high yield corporates (HYLB), TIPS (SCHP), and municipal bonds (VTEB) yet delivered average performance over eight years. In stark contrast, Fidelity Go’s concentrated municipal bond, primarily through MUB, achieved superior performance, while Vanguard Personal Advisor’s simple municipal allocation with minimal tactical changes delivered solid returns. The evidence suggests that fixed income success stems from strategic asset allocation decisions and execution quality rather than tactical complexity.

Large-Cap Growth Drives Performance Over the Trailing One Year

Betterment Climate Impact SRI, SigFig, and Vanguard Digital Advisor topped the robo-advisor performance rankings over the past twelve months. Large-cap equities delivered outperformance over smaller companies. The Russell 1000 Index gained 15.65% over the trailing twelve months, while the Russell 2000 Index managed only 7.66%, creating an advantage that benefited large-cap focused strategies. Betterment Climate Impact SRI leveraged this dynamic with an 80% large-cap allocation, well above the robo-advisor average of 70%. SigFig and Vanguard Digital Advisor both held 74% in large-caps, positioning them to capture the significant outperformance of large-cap companies over their smaller counterparts.

Growth stocks maintained a meaningful advantage over value during the one-year period. The Russell 3000 Growth Index returned 16.88% compared to the Russell 3000 Value Index’s 13.28%, providing a benefit that helped the top performing portfolios. Betterment Climate Impact SRI allocated 28% to growth, while SigFig maintained a 29% allocation to growth.

Domestic equity positioning created headwinds as international markets outperformed U.S. equities. The MSCI EAFE Index surged 18.42%, exceeding the S&P 500’s 15.14% return, while the MSCI Emerging Markets Index gained 15.90%. Betterment Climate Impact SRI allocated 36% to internationals, while SigFig and Vanguard allocated 40% and 32% domestic weightings, respectively.

Fixed-income performance was robust across most sectors, with the Bloomberg US Aggregate Bond Index returning 6.08% over the trailing one-year period. Corporate bonds outperformed municipals, with the Bloomberg US Corporate Index gaining 6.91% compared to the Bloomberg Municipal Bond Index’s 1.11% return. This corporate bond strength benefited platforms with diversified credit exposure, while municipal-focused strategies lagged.

The Domestic Large-Cap Formula That Drove Long-Term Success

SoFi, Fidelity Go, and Wealthfront emerged as the top-performing robo advisors over the trailing eight-year period, benefiting from concentrated exposure to large-cap U.S. equities and municipal-bond allocations, which is a strategy that benefited during multiple prior market cycles.

The sustained outperformance of U.S. markets provided the foundation for their success. The S&P 500 delivered a robust 14.36% annualized return, outpacing developed international markets at 7.78% and emerging markets at 5.32%. SoFi maximized this advantage with a significant domestic allocation at 78%, followed by Fidelity Go at 71% and Wealthfront at 73%. This domestic concentration allowed these portfolios to capture the strength of U.S. market performance compared to international markets over the prior eight years.

Large-cap equity proved decisive during these eight years. The Russell 1000 Index generated a 14.12% annualized return, substantially ahead of the Russell 2000’s 6.92%, creating an advantage that benefited large-cap focused strategies. SoFi led with an 81% large-cap allocation, while Fidelity Go maintained 77% and Wealthfront held 71%, all of which were above the robo-advisor average of 70%. This positioning enabled these portfolios to benefit from the mega-cap technology companies that dominated market returns.

Growth’s superiority over value was also a driver of returns over the prior eight years. The Russell 3000 Growth Index returned 17.78% annually versus just 9.00% for the Russell 3000 Value Index. SoFi benefited from its 30% allocation to growth, which is the highest among the robo accounts in this cohort. Interestingly, Fidelity Go and Wealthfront maintained more modest exposures to growth, at 26% and 25%, respectively, compared to the average of 26%, showing that their above-average domestic large-cap exposure provided sufficient performance tailwinds to overcome this more balanced style approach.