Sustainable Ethical Allocation Portfolios – October Update

Sustainable Ethical Allocation Portfolios – October Update


Keeping your investment head……. while others around are losing theirs


The majority of the financial markets experienced their worst month for performance since March earlier this year, triggered by a significant increase in active covid19 cases in Europe and the US. With the real possibility of further full lockdowns in the region, there is the fear that this will further delay any economic recovery from the previous covid19 lockdowns and put additional pressure on Government assistance.


Just to add further uncertainty to the investment mix, we also have the upcoming US elections which (unfortunately) seem to be dividing America even more.


The Dow Jones Industrial Index (DJIA) and the S&P 500 Index finished the month down by 4.3% and 2.3% respectively. European markets were even harder hit with the UK FTSE All Share down 4.5%, French CAC down 4.8% and the German DAX down 8.9% for the month. There was some positive performance for the month from Asia with Japan’s Nikkei up 1.1% and the HSCEI in Hong Kong up 3.8% for the month of October.


The month of October started well enough, with the Sustainable Ethical Allocation portfolios continuing their positive performance to new all-time high levels. Unfortunately, the portfolios were not immune from the significant equity market falls in the last 2 weeks of October and did end up having a negative performance of just under 1% for the month………… however these losses were significantly less than that experienced by the general markets (& is the first negative month for the portfolios since March).


Performance for October 2020

A.   – 0.9% – Cautious Allocation
B.   – 0.8% – Balanced Allocation
C.   – 0.9% – Growth Allocation


As expected, our exposure to global equities, especially to European and US companies were generally negatively affected, with the Royal London Sustainable World Trust (held across all 3 Sustainable Allocation Portfolios) suffering a loss of 2.9% for the month. However, our exposure to Asian & Emerging Markets was positive with a +4.5% return over the same period.


By employing a diversified strategy which included an allocation towards the more cautious fixed interest and bond type funds did help in minimising the portfolio losses for the month. While we obviously never like to see a situation where a portfolio performs in a negative way, it must be remembered that there will always be some levels of volatility when investing, which in turn will result in periods of negative returns……… it is therefore very important that investors do have an appropriate investment timeframe and ensure that any short term funding requirements are maintained in cash or very low risk, cash like investments.


We believe that the Sustainable Ethical Allocation Portfolios will continue to offer investors the potential for market leading returns over the medium to longer term through exposure to high quality fund managers, investing in high quality (& sustainable) companies………… and because of this diversification and quality, doing so with lower levels of risk and volatility.


2020 and the Performance So Far….


Even with the set back of a slightly negative return for October (plus the significant market falls in March), the Sustainable Ethical Allocation portfolios have still provided investors market beating returns so far for 2020, even exceeding our own forecasts and objectives.


For comparison, the FTSE All Share Index is still struggling to recover from the market turmoil of covid19 through February & March with negative performance of 23% year to date.


This emphasises the importance of diversification and investing into quality assets.


23% – Growth Allocation, 18% – Balanced Allocation and 12% – Cautious Allocation. This compares to the FTSE All Share Index which is still struggling this year, down over 23% over this same period.

A. Cautious Allocation
B. Balanced Allocation
C. Growth Allocation
D. FTSE All Share Index


Strategy Going Forward….


As with most of the world, we will be watching the US election closely. While the 2 political parties seem to have different agendas for the future of the US economy, where there will be no doubt some significant business winners as well as losers, we still feel that the quality and the blended investment style of the Fund Managers currently being used plus the strategy of investing in quality businesses with a long term sustainable business model, there will be no need to make any significant allocation adjustments to our Sustainable Allocations, irrespective on who ends up being the winner.


We are happy with the current diversified asset allocations as well as the underlying Fund Managers. While saying that, we will continue to monitor and review the funds being used to ensure that we only have access to high quality, top quartile Fund Managers.


While we are enjoying good solid positive returns with many of our equity funds, we are very mindful that our portfolios need to remain well diversified and that they do not get significantly ‘overweight’ to a specific asset class or sector.


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.   



 Sustainable Ethical Allocation Portfolios


The Sustainable Allocation portfolios are currently invested in 10 – 12 different managed funds, utlising the expertise of the following Fund Managers.




Cautious Allocation


The SUSTAINABLE ETHICAL CAUTIOUS ALLOCATION PORTFOLIO will generally have approx. 65% of the assets invested in various bond, fixed interest and cash type assets that are regarded as lower risk. The remaining will be allocated with a growth style of equities and infrastructure type assets.


The objective of this allocation is to achieve a net return of 5%-6%PA but with lower levels of short term volatility.

  • A. Sustainable Ethical Cautious Allocation
  • B. IA Mixed Investment 20-60% Share Index


Balanced Allocation


The SUSTAINABLE ETHICAL BALANCED ALLOCATION PORTFOLIO will have approx. 65% of the allocation invested in growth type assets such as equities and infrastructure with the remaining allocated to more cautious type assets such bonds, fixed interest and cash type assets.


The objective of this portfolio is to achieve similar type returns associated with direct equity investing, while experiencing lower levels of short term volatility, especially during negative market periods.

  • A. Sustainable Ethical Balanced Allocation
  • B. IA Global Index


Growth Allocation


The SUSTAINABLE ETHICAL GROWTH ALLOCATION PORTFOLIO will invest in a range of equity and growth style funds and is designed for the longer term investor that can accept higher levels of short term volatility.


The objective of this allocation is to achieve a net annual return of 10% – 12%pa but investors need to be aware and accept the higher levels of short term volatility, which will include periods of negative returns.

  • A. Sustainable Ethical Growth Allocation
  • B. IA Global Index