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Morningstar Launches ESG Asset Allocation Managed Portfolios

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Morningstar on Thursday announced the launch of the Morningstar ESG Asset Allocation Managed Portfolios, a series of five funds of ETFs and mutual funds, for advisors whose clients are concerned about environmental, social and governance issues.

Like all managed portfolios, these ESG-centric ones allow advisors to outsource investment management activities so they can have more time to spend on financial planning and other customized services for clients.

The portfolios are available immediately for advisors through Morningstar’s  turnkey asset management platform (TAMP) and will expand to third-party platforms in the future.

“Advisors are increasingly looking to address the environmental, social, and governance concerns of a growing number of investors. These new ESG portfolios help investors meet their financial goals in a way that’s aligned with their values,” said Paul Arnold, portfolio manager of the Morningstar ESG Asset Allocation Portfolios, in a statement. “The goal of these portfolios is to achieve long-term financial goals while incorporating sustainable values.”

Morningstar announced the new portfolios at its investment conference in Chicago.

There are five portfolios in the series, all long-term core portfolios which range from conservative to aggressive. Four are comprised of both stock and bond  ETFs and mutual funds, and the  fifth, the most aggressive, can hold as much as 100% stocks or as little as 80% stocks with fixed income making up the rest.

The five portfolios combine passive and active funds and accompany different risk profiles: aggressive growth, growth, moderate growth, income and growth and conservative. Expense ratios range from 30 to 55 basis points. 

In a recent survey of close to 1,000 investors measuring hypothetical tradeoffs, Morningstar found that over 50% weighed sustainability more heavily than returns and 25% weighed the two goals equally and boomer men, not just women and millennials, were interested in sustainable investments.

Its analysis of 56 Morningstar ESG screen indexes  found that since 2009 41 outperformed their non-ESG counterparts, according to Dan Lefkovitz, Morningstar index strategist, who spoke at a press briefing at the annual conference. ESG indexes consistently scored well for higher quality, financial health and limited volatility than other market indexes, said Lefkowitz.

Ray Sin, senior behavioral scientist at Morningstar, said advisors can benefit from offering these new portfolios because their clients who prefer ESG-focused investments will feel that “if you care about my money and my financial goals you care about me.”

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