The managed portfolio’s sustainable range is no longer invested in the UBAM Positive Impact Emerging Market Equity fund, after third party data provider identified tobacco production, in the form of e-cigarette production, via a joint venture of a holding in the fund.
A spokesperson told Investment Week that while the firm was informed that revenue for that holding had ceased, Quilter’s investigation found “there was not enough evidence to override our own stated policy for the sustainable portfolios”.
“As a multi-manager we feel it is of utmost importance that we independently monitor adherence to the objectives we have laid out to our clients and take appropriate action if necessary,” the spokesperson said.
“This can occur where a fund has different revenue threshold monitoring or exclusions to us or utilises a different ESG data provider, as widely commented on with the variation of ratings and assessments of the same corporate entities. In this instance we felt we had to remove the fund as a result.”
Stuart Clark, WealthSelect portfolio manager, said it was important that the portfolio’s sustainable and responsible range “continue to deliver the dual mandate that clients come to expect, and as such it means acting where we see funds falling short”.
“We act as stewards for our investors and their money and it is important we are active when we see harm where we should not,” he said.
More broadly, the portfolio’s latest rebalancing also saw changes to the portfolio’s responsible and sustainable ranges, including de-risking its highest risk portfolios by increasing and introducing a cash allocation, respectively.
“This reflects the cautious stance taken by the portfolios and utilises all the tools available to increase the defensiveness of these higher risk portfolios in a challenging market environment,” the firm said.
As part of Clark’s cautious stance, the WealthSelect Managed Portfolios are now overweight fixed income compared to their strategic allocation, after the manager added more exposure to sovereign bond funds at the expense of alternatives and cash.
Against a backdrop of rising rates, Clark sees corporate earnings and standards of living beginning to deteriorate under the pressure, which Quilter said represents “a real risk of recession in the near future”. As a result, the portfolio remains underweight risk assets across all ranges.
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