Share in the return potential of the world's stock markets while also taking ecological and social criteria into account: that's what we aim to achieve with our sustainable portfolio. Here's why we can now pursue this goal even better.
Shortly before the turn of the year, quite a bit was still set in motion in quirion's sustainable portfolio. Along with the rebalancing, the regular realignment to offset value fluctuations, the investment management made extensive adjustments to the composition — for equities as well as bonds. Because there are now ETFs on the market that make it possible to pursue the intended investment objectives even more precisely.
On the equity side, the HSBC MSCI World Value ESG is new to the sustainable portfolio with a weight of 20 percent. Also newly added were the HSBC MSCI World Small Cap ESG (8 percent), the HSBC MSCI Emerging Markets Value ESG (4.6 percent) and the HSBC MSCI Emerging Markets Small Cap ESG (2.4 percent). In return, three previously held ETFs were sold and the weights of the remaining ETFs were reduced somewhat. „With these changes, we now achieve our targeted factor exposures much better,“ explains Kai Hattwich, Lead Portfolio Manager in the asset management of Quirin Privatbank, from where the product switch was steered.
Investing worldwide — but efficiently
There are five factors that guide quirion's product selection on the equity side, whether for the global or the sustainable portfolio. According to scientifically grounded analyses, going by way of these factors is the most efficient path to pushing diversification to its limit — and thus arriving at the best possible risk-return ratio.
Through the adjustments, the „Value“ and „Size“ factors in particular have now been strengthened in the sustainable portfolio. They now sit almost exactly on their target value.
The adjustments also improved the portfolio's profile with regard to the ecological and social characteristics that determine the selection and weighting of the securities. So-called ESG-screened approaches, which stay relatively close to conventional indices, are now avoided. Beyond that: „HSBC, the issuer from which all the newly added equity ETFs originate, is very active when it comes to sustainability — it practices active exercise of voting rights and dialogue with companies, for example,“ notes ETF expert Hattwich.
Reducing fluctuations
In the bond component of the sustainable portfolio, some products were likewise swapped and others reweighted. New additions are the Amundi Global AGG SRI 1-5 and the Invesco EUR Corporate Bond ESG Short Duration Multi-Factor. „Through the reshuffle, the duration — that is, the average length of capital commitment — has fallen to 3.55 years,“ Hattwich explains. Setting up the bond portfolio accordingly is not so simple. Because „green bonds“ in particular — bonds with a sustainable orientation — often have long maturities. But the prices of long-dated bonds usually react with larger fluctuations to changes in interest-rate levels than those of short-dated ones.
In quirion's portfolios, bonds are used primarily as a risk buffer. Over the long term, adding high-quality, low-risk bonds can cushion the fluctuations of the stock market. This makes an equity investment possible even for investors for whom a pure equity investment would not be suitable given their risk profile.
On track with ESG metrics
Take ecological and social criteria into account while still spreading capital as broadly as possible — that is the core strategy of the sustainable portfolio. In total, it comprises a good 3,000 equities and more than 3,500 bonds. And when it comes to ESG metrics, it stands out clearly against many other portfolios. For example, the CO2 intensity — the carbon dioxide emissions relative to companies' revenue — is more than 50 percent lower in the sustainable portfolio than the figure for a comparable portfolio without any consideration of ESG criteria.
Besides the strategy pursued, an important aspect of investing is of course also the cost factor. „The managed sustainable portfolio at quirion has become significantly cheaper in the Digital package since summer 2022 — by around 30 percent,“ Hattwich underscores. „In the current environment, there aren't many services you can say that about.“
