Sustainable Ethical Allocation Portfolios – November Update

Vaccine driven economic recovery & the financial markets cheered…!!!


After all of the chaos of last month, with most markets experiencing their worst performance since the covid19 induced panic of March, the month of November saw a complete reversal of this negativity with many equity markets posting their best monthly gains in many years.


And this positive momentum was also experienced by all 3 of the Sustainable Ethical Allocation Portfolios, with the Growth Allocation +8.0%, Balanced Allocation +6.5% and the Cautious Allocation +4.8% for the month.

A. Cautious Allocation – 4.8%

B. Balanced Allocation – 6.5%

C. Growth Allocation – 8.0%


While we are always happy to make a profit, and this recent month has pushed the performance to all time highs for the Sustainable Allocation Portfolios, but I must actually point out that this recent month’s performance was actually below that of our portfolio benchmarks.


For example, the FTSE All Share that we have used as a reference this year had an extraordinary monthly performance and was up 12.43% for November.


So why did the Sustainable Allocation Portfolios underperform..??


With the announcement from Pfizer that their covid19 vaccine had a very high success rate in testing, this provided a positive outlook that we may get back to a pre-covid type world sooner than expected. This was obviously a very good situation for the sectors that have been the worst hit by the covid19 economic lockdowns, specifically airlines, tourism sector (cruise lines, hotels) and with all of this potential increase in travel, the energy sector also saw significant gains in November.


Our Sustainable Allocation Portfolios have minimal exposure to those sectors and as such, did not get the same level of performance last month…….. but…… this is also the reason why the year to date performance is significantly greater than that of our benchmarks.


So for this month, the higher quality assets the portfolio holds actually detracted from the performance potential….. but I think I would rather maintain the quality for the medium to longer term potential benefits.


2020 Year to date performance v’s FTSE All Share

A. Cautious Allocation

B. Balanced Allocation

C. Growth Allocation

D. FTSE All Share



So how did the underlying Managed Funds perform….??


November did provide a rare opportunity where every one of our underlying funds held in the 3 Sustainable Allocation Portfolios, all produce a positive return for the month.


The Baillie Gifford Positive Change fund, which is held in all 3 portfolios, was the best performer (again) with a monthly return of 12.7%


The very highly rated diversified Royal London Sustainable World Trust, which is also held across all 3 portfolios, returned 3.8% for the month. But as has been stated previously, the allocation to quality, sustainable companies actually detracted from performance this month.


Our exposure to the more cautious fixed interest, ethical bond funds returned 1.4% – 2.5% for the month.



Strategy going forward….


While we would not be surprised to see a further rally in the same sectors as what outperformed in November, we are still going to maintain our diversified approach with our portfolios, once again with a strong focus on businesses that have a strong, sustainable business models. The obvious question is why not chase the recovery in the other sectors which potentially could provide greater, short term returns…… while that may be the case, the fundamentals for maintaining a longer term focus utilising a diversified portfolio of quality businesses, is as strong as ever…… if not even greater now at these unprecedented times.


Need to remember that this same strategy not only was beneficial during the darkest days of the covid19 crisis, but was also beneficial PRIOR to the covid19 outbreak…….. once again, quality of assets and fund management are very important.


So we are maintaining our current fund manager allocation for the Sustainable Ethical portfolios.


As part of our ongoing client management, we stress the importance of ensuring that investors maintain sufficient cash (or very low risk, liquid assets) that can be called upon to cover their short-term income and / or capital purchase requirements. I strongly believe that this is even more imperative now due to the extremely uncertain and unprecedented economic and market conditions we are experiencing.


The other area that we encourage investors to look at is that of diversification…….. the Sustainable Allocation Portfolios are well diversified with not only asset type (equities, bonds, cash) but ensuring that there is also diversification of geographical region.


The underlying Fund Managers (Baillie Gifford, Royal London, Rathbones, Vanguard for example) will also take a different approach and style to their investment strategies and by blending these different managers and investments styles & strategies, potentially will result in lower volatility and more consistent overall portfolio returns.


Investors can also further diversify their portfolios through the use of Structured Notes. While Structured Notes are not our core investment offerings (we prefer the use of liquid, daily traded funds, ETF’s and direct shares), they can provide an opportunity to reduce short term volatility while receiving a pre-determined (conditional) investment return. But it must be stressed that Structured Notes are generally regarded as longer term investments so timeframe and whether access to capital is required needs to be seriously considered. 


Please click the below link to get information on the range of Structured Notes currently available via Ethical Offshore Investments.     


If you would like to receive further information on the Sustainable Ethical Allocation Portfolios or on the underlying individual Managed Funds, please click REQUEST MORE INFORMATION.