FE Invest, FE’s model portfolio service, today announced the launch of its Responsibly Managed Portfolios range – a suite of risk-targeted portfolios designed to support financial advisers in meeting the surge in demand from clients for sustainable and ethical investments.
Charles Younes, research manager commented: “Financial advisers have seen a significant influx of client funds into sustainable investments in recent years and the investment strategy has grown 107.4 per cent annually since 2012¹. With the UK government calling for such investments to be made more widely available, as well as growing demand from millennials who are in line to receive more than $30 trillion of inheritable wealth², we believe interest in responsible investments will soar in the next decade.”
As with all of FE Invest’s portfolios, the three new Responsibly Managed Portfolios are designed with specific investor risk profiles in mind and are built based on the same unique investment process. The methodology is driven by FE’s industry renowned ratings system, comprehensive fund data and specialist optimising technology built in-house, from which funds are selected that will give each portfolio the appropriate level of volatility and largest diversification benefit. This is overseen and supplemented by a large, experienced team of analysts.
Younes continues: “Sustainable and ethical managers can be exposed to similar biases due to the nature of the companies in which they invest. As such, selecting managers with different themes and approaches is key to maximising diversification. Our portfolios include a wide range of funds – from negatively screened funds that avoid companies investing in armaments, gambling, tobacco and so on, to positively screened funds which look to invest in companies making a positive impact.”
To be included in the Responsibly Managed Portfolios, funds must have a dedicated negative or positive screening mandate; funds just considering these issues as part of a regular investment process will not make the shortlist.
Sophie Meatyard, research assistant at FE comments on some of the funds which made it into the new portfolios: “Hugo Ure, manager of Trojan Ethical Income applies a negative screen to their investment universe. This screen results in 20 percent of their investable universe being removed. The portfolio remains closely linked to the original Trojan Income fund and we expect the defensive nature of the fund to remain. The screens result in a tilt towards consumer goods and financials and away from energy.
“EdenTree Amity UK uses negative screens as well as seeking companies that make a positive contribution to society and the environment through sustainable and environmental practices. Due to the fund’s screens, the fund has a large allocation to small- and mid-sized companies, which could make investment riskier. EdenTree also has an external Amity Panel who ensure the ethical mandate remains the focus point.”
- “Report on US Sustainable, Responsible and Impact Investing Trends 2014” by The Forum for Sustainable and Responsible Investment (http://www.ussif.org/Files/Publications/SIF_Trends_14.F.ES.pdf)
- “The “Greater Wealth Transfer: Capitalizing on Intergenerational Shift in Wealth” by Accenture Wealth and Asset Management Services (https://www.accenture.com/nl-en/~/media/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_5/Accenture-CM-AWAMS-Wealth-Transfer-Final-June2012-Web-Version.pdf)
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