One of the key highlights from Backend Benchmarking’s third-quarter Robo Report is the outperformance of socially responsible digital portfolios.
Among six SRI portfolios operating for at least one year — each paired with a traditional portfolio from the same firm — four beat their traditional counterpart in one-year performance. The SRI outperformers were from Betterment, Morgan Stanley, TIAA and Wealthsimple, and their outperformance ranged from about 0.6 percentage points (for Betterment) to roughly two percentage points for Morgan Stanley and Wealthsimple.
SRI portfolios from TD Ameritrade and Ellevest underperformed their traditional counterparts — TD because of its excess cash holdings and Ellevest because of the portfolio’s narrower focus on women’s issues rather than a broader SRI approach, says David Goldstone, head of research for The Robo Report.
“For SRI portfolios to outperform they must overcome the increase in costs of the underlying funds,” according to the third-quarter Robo Report. “Although one year is still a relatively short period to judge long-term trends, the comparable performance SRI portfolios is a positive sign for this investing trend if it is shown that investors do not pay a performance premium to consider environmental, social or governance factors when constructing portfolios.”
Looking longer term, Fidelity Go continued to lead all other robos for best total portfolio performance and equity performance for the trailing two and three years through the third quarter, repeating its performance for the first and second quarters for total portfolio, and best equity performance for the two-year trailing period.
Axos Invest, the renamed WiseBanyan after its purchase by Axos Financial, took second place for trailing two-year and three-year total portfolio returns through the third quarter, also an encore of its performance in the first two quarters.
There were “no significant shifts in Axos Invest’s portfolios since its takeover,” said Goldstone.
Ally Financial placed third for total portfolio performance and led the fixed income category for the two-year trailing period. Schwab led that category for three–year trailing performance.