For advisors who have clients with an expressed desire to have their investments mirror their personal values, whether those values are social, religious, or environmental, there are literally hundreds of choices, including mutual funds, ETFs, and separately managed accounts. The tricky part has always been aligning a carefully planned asset allocation strategy with those expressed values to create a comprehensive investment portfolio, but a new series of four multimanager asset allocation funds created by Pax World and Morningstar Associates may make that a little easier.
In a recent interview, Joe Keefe, Pax World’s president and CEO, acknowledged that while there are networks of advisors such as First Affirmative, Progressive Asset Management, and Veris Wealth Partners, with business models founded on principles of socially responsible and sustainable investing, for the vast majority of advisors this is a relatively new subject. “We’re seeing an increased demand for sustainable investments, green investments, socially responsible investments–call them what you will,” he says. “Up until now those advisors have really had no systematic way to go about constructing portfolios. If they want to create an asset allocation plan for a particular client, or incorporate sustainable and SRI options into the asset allocation plan they already have for that client, they have to do all the work themselves. It’s a laborious process,” he points out. “What we were trying to do here is create a one-stop, turnkey solution so there’s a series of asset allocation funds that hopefully would be appropriate for any client that came to one of those advisors.”
“With these portfolios the advisor can put the client into the portfolio that most closely matches the asset allocation that’s already been designed for the client and at the same time the client gets access to this great variety of ESG (environmental, social, and governance) approaches and managers,” adds Jon Hale, senior consultant at Morningstar Associates and the head of the team that will act as subadvisor to the funds.
The four new funds–ESG Managers Aggressive Growth Portfolio (95% stocks/5% bonds); ESG Managers Growth Portfolio (70% stocks/30% bonds); ESG Managers Moderate Portfolio (50% stocks/50% bonds); and ESG Managers Conservative Portfolio (65% stocks/35% bonds)–each use up to 15 strategies, or “sleeves,” and 11 different managers who integrate those ESG factors into their investment analysis and decision making. Pax World is the investment advisor to the portfolios while Morningstar is charged with manager selection, asset allocation, and portfolio construction and monitoring.
The subadvisors chosen to manage individual sleeves include some of the best-known names in sustainable investing and give advisors and their clients access to a wide range of investing styles. The managers and their respective sleeves include:
o Access Capital –Investment Grade Fixed Income Strategy
o Ariel Investments–Small/Mid Cap Value Strategy
o ClearBridge Advisors–Large Cap Value Strategy
o Community Capital Management–Investment Grade Fixed Income Strategy
o Miller/Howard Investments–Equity Income Strategy
o MMA Capital Management–Investment Grade Fixed Income Strategy