Last week Ben Gilbert, Senior Associate Partner and Manager of Sarasin & Partners Model Portfolios joined Citywire New Model Adviser's A-Z model portfolio panel.
From inflation to the role of passive funds in model portfolios, here are some of the key points discussed.
What role do model portfolios play and how do you determine which model portfolio is right for a client?
Model portfolios offer advisers and their clients an all-in-one solution to asset allocation, fund selection and risk management. In providing an actively managed long-term investment solution, they allow advisers to focus on their client’s financial planning and answering the more strategic questions. When it comes to understanding which portfolio is right for which client, that’s a decision that sits with the advisor and their client. Here, an investment manager's role is to focus on the investments themselves, aiming to deliver the best risk adjusted returns in line with each model’s pre-determined risk budget.
Is there a role for passive funds in a model portfolio?
Passive investments often have a place in model portfolios but as with any investment, so long as they contribute towards the overarching investment performance and goal. While many see active funds as the key to long-term outperformance, passive investments often allow investment managers to take advantage of shorter-term market opportunities. On the whole passive solutions are seen as a complement to an active strategy.
What does ESG integration in model portfolios look like?
ESG integration within model portfolios should be no different to any other ESG portfolios – requiring active engagement with companies and third-party fund managers to ensure businesses and investments are being managed responsibly. For direct equities this involves closely monitoring investee companies and engaging with management on issues of concern and voting on matters put to shareholders. For third-party fund managers, this means ensuring their approach to responsible investing is equally as integrated – how do they assess companies on ESG criteria, how to they engage with companies and challenge where needed, how do ESG findings impact stock selection?
To see how we integrate ESG, take a look at our Responsible Model Portfolios.
Are you concerned about inflation and how is that impacting portfolios?
The panel agreed that while expectations are for an inflation bump over the next few quarters, over the longer-term things will likely settle down. Inflation is expected to be most pronounced as economies reopen, the base effects of last year take affect and supply chains in some sectors are squeezed.
To protect against inflation, the panel agreed being over overweight real assets was key, with returns underpinned with government’s fiscal funding. Asset allocation was also discussed in the context of risk and return and that against a backdrop of slowing global growth, investors will need to be prepared to increase their risk exposure.
If you are a private investor, you should not act or rely on this document but should contact your professional adviser.
This promotion has been approved by Sarasin & Partners LLP of Juxon House, 100 St Paul’s Churchyard, London, EC4M 8BU, a limited liability partnership registered in England & Wales with registered number OC329859 which is authorised and regulated by the Financial Conduct Authority with firm reference number 47511.
Please note that the prices of shares and the income from them can fall as well as rise and you may not get back the amount originally invested. This can be as a result of market movements and also of variations in the exchange rates between currencies. Past performance is not a guide to future returns and may not be repeated.
All details in this document are provided for marketing and information purposes only and should not be misinterpreted as investment advice or taxation advice. This document is not an offer or recommendation to buy or sell shares in the fund. You should not act or rely on this document but should seek independent advice and verification in relation to its contents. Neither Sarasin & Partners LLP nor any other member of the Bank J. Safra Sarasin group accepts any liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. The views expressed in this document are those of Sarasin & Partners LLP and these are subject to change without notice.
Where the data in this document comes partially from third party sources the accuracy, completeness or correctness of the information contained in this publication is not guaranteed, and third party data is provided without any warranties of any kind. Sarasin & Partners LLP shall have no liability in connection with third party data.
© 2021 Sarasin & Partners LLP – all rights reserved. This document can only be distributed or reproduced with permission from Sarasin & Partners LLP. Please contact [email protected]