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Building our clients portfolios

At the end of September 2022, Carey was on a panel at the RIAA (Responsible Investment Association of Australasia) conference, talking about how we build our clients portfolios.

This is an area that we have spent a lot of time on over the last two years, and are continuing to develop and streamline, so we thought it would be a good idea to give you some idea of the work that we put in.

We start off with our three different portfolios Base (for existing clients only who wish to stay in this non ethical portfolio), Hybrid and Ethical.  We are doing quite a bit of work at present, which we will tell you about at your annual review meeting next year to build these portfolios within a clearer framework.

We have our different asset types (New Zealand Fixed Interest, Australasian Equities, International Equities, Property and - from 2022 - Multi-Sector).  We use multiple research provider resources and our own knowledge and understanding of what is happening in the world to develop our 'tactical' allocation for each category.  The long term strategic allocations are modelled off Morningstar information, but the tactical allocations are updated based on what is happening in the world around once a year - or more regularly if necessary.  This is then personalised to each client in your rebalancing recommendations.

We then carry out negative screening based on the Mindful Money research, where we identify the nasties of the fund managers that we are looking at using in each portfolio.  It isn't currently realistic to get nil nasties and we then engage with each fund manager to understand their rationale for investing in those nasties, which assists us in developing the recommended fund managers for each portfolio.

This is followed by an analysis of where each fund manager is investing (eg small companies, big companies) which is accompanied by a detailed ethical investment analysis of each fund manager and fund using our 65 question ethical analysis tool.  This covers things like the fees, size of the fund, quality of the investment team, financial robustness of the funds management company, and includes an understanding of their commitment to ethical investing, looking at things like whether they are a member of RIAA, whether they are certified or a leader with RIAA, whether they map their investments to the UN Sustainable Development Goals and a myriad of other indicators.

Unfortunately, the technology and information isn't available yet for us to be able to conduct a robust analysis of things like carbon emissions, but this area is developing rapidly and we anticipate that we will be able to do this in a few years.

We then build the different portfolios in accordance with the frameworks that we have developed and are refining for each portfolio. At times this may mean that we commit to supporting the fund to ensure that the fund is available in New Zealand and on the investment platform that our clients use.

This process is continuing to develop and be refined and we will keep you up to date on the new tools that we have (and are) building to make our framework as robust as possible.



 

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