Russell Investments has just launched Russell Investments Sustainable Managed Portfolios.
Russell Investments has just launched Russell Investments Sustainable Managed Portfolios, which help advisers offer investment options to clients that are seeking to align their investments with their ESG values. But Russell is no 'johnny-come-lately' to the ESG space and Russell Investments head of adviser and intermediary solutions, Neil Rogan, spoke to Industry Moves about how ESG became part of the organisation's DNA.
How important is ESG to Russell?
We've been in the ESG space really since 2009, when we signed up to be members of the United Nations Principles of Responsible Investing (UNPRI). Globally we run about $50 billion in in ESG strategies and each year we produce a report on our active ownership. We've been quite active in that space for a number of years. We're not one of these johnny-come-latelies [ that] latch on to a thematic and make a product. ESG is in our DNA and is aligned to the values that we have as an organisation.
What feedback were you getting from advisers around ESG?
Well, no one goes to an adviser and says, 'I want a balanced fund. I want to be in the default' but from an ESG perspective they have come to our advisers, and advisers in general, and said 'I want ESG'. Particularly in Australia the 'E' seems to be the biggest element of the E, S and the G. And maybe that's because in Australia, what we're seeing around the environment is in front of our eyes.
What we were hearing from advisors is that their clients were looking for something more, and in many cases, they weren't looking for the really dark green kind of stuff. They still want to get a good return, but they don't want to get that return through compromising their values. However, they understand that the Australian market isn't deep enough in many cases to be dark, dark green.
Why did you launch managed portfolios?
Because clients and advisers are looking for transparency of the funds, they want the beneficial ownership. Managed accounts/portfolios are seen as more efficient and we all know that intermediaries, mainly financial advisors, are utilising managed accounts. It's good for their clients, good for business, etc.
What's your process for working out what goes in these model portfolios?
From a broader portfolio management point of view, we utilise a process called design, construct and manage. If you think of this in the same way you think of the way you'd build a house, from a design perspective, we have our strategic asset allocation team, and a deep understanding of what clients need, which work together to design the types of portfolios that our clients - being the advisors and their end clients - are looking for.
In terms of how we've designed these managed accounts to meet the needs of the market, we've done it really in three ways in the ESG phase. We've utilised a range of active managers at the core of our managed accounts. And that's true to our core in terms of our manager research and our major research capabilities that have been in our DNA for 85 years.
The models, depending on the risk profile, are roughly a third, a third, a third. So, they are a third of our multi managers, a third direct equities and a third ETFs and other strategies. For example, the balanced Sustainable Equity Managed Portfolio is made up as follows:
* Direct shares make up 16 per cent of the portfolio;
* Active managers make up approximately 48 per cent of the portfolio, and include the likes of Pendal, Impax, Altius and First Sentier;
* Other strategies (including ETFs and other funds) make up approximately 36 per cent of the portfolio.