Just a quick one:
I'm moving the goalposts on my example long only portfolio using UK listed ETFs (original blog post is here), done in the spirit of my second book Smart Portfolios:
I've replaced all the ETFs in that portfolio with ESG funds
This is something I've wanted to do for a while, but the availability of ESG funds has really exploded recently and now the coverage is good enough that I think it's realistic to run an entire portfolio with just ESG.
The criteria is similar to before: low TER, reasonable AUM and ideally a distributing fund; although I've had to be a bit more flexible as the choice obviously still isn't as good.
My ESG criteria was simple: I used the ESG criteria checkbox in justetf.com; I am not going to get into an argument about good versus bad ESG as I'm not an expert on that subject. My logic is that any ESG fund is probably better for the environment than an average non ESG fund, even if on balance there are going to be varying degrees of ESG fund. The portfolio reflects what an average investor can achieve without doing vast amounts of research, or investing directly in the underlying stocks (which again, will require significant research).
The only fund I excluded on ESG grounds was LGGG, which is very ESG-lite and only seems to exclude companies that actively murder people (one of it's largest holdings is Exxon!). Inevitably there are a few categories where I just couldn't find a suitable ESG fund. I also added a new bond category, bond issues by multilateral institutions, which matches the fund MDBU.
Rather pleasingly, and much to my surprise, the like for like matched simple average of TER across all the various ETF is virtually unchanged from before: 0.23%, just 1bp higher. This may just reflect fee pressure in the industry generally - I haven't updated the fees of the original portfolio for a few years and they have probably come down a bit, or cheaper funds may be available that weren't around originally.
I've created a new spreadsheet with the new tickers and portfolio in; the old spreadsheet link is still around but won't be updated.
The plan is also to move my own investments into these funds, although it might take a few years as I don't want to incur a massive capital gains tax bill in the process.
ESG is greewashing. Nothing we do in the west makes any difference as long as China keeps increasing its emissions each year by the UK's annual output the west is a rounding error. Time to stop wasting time and money with this green obsession.
ReplyDeleteDo whatever you want with your portfolio, but this is what I'm doing with mine.
DeleteHi Rob! I hope everything is going well for you.
ReplyDeleteI noticed that in this portfolio (as well as the previous one), you separate your equity etfs based on beta, value, and high yield but not on momentum. For example, EEDG (US beta), HDIQ (US yield), XZES (US value) but not IUME (iShares MSCI USA Momentum Factor ESG). Why?
Thanks in advance for your time!
I already have a lot of exposure to momentum in my asset class timing long only, plus my futures trading. But feel free to allocate to these yourself.
DeleteRob,
ReplyDeleteIn SM, the long only portfolios are not set up to be hedged (by buying inverse etfs) as 100% is allocated per handcrafting. But if the signals then show a change in direction to the downside-- how would one put on hedges to cover the volatility of the equity exposure inside a 1M portfolio, for example?
I don't know what you mean by 'SM', nor do I understand what you mean by 'hedges to cover the volatility of the equity exposure inside a 1M portfolio'. But I don't need to understand - this is a long only portfolio.
DeleteI'll just step back: Is there no mechanism in a smart portfolios for reducing market risk associated with owning a long stock portfolio during severe down moves of the market?
DeleteEr.... selling some stocks?
Deleteno . . . looking to do a single transaction to minimize costs, ie, in an IRA, something simple like inverse etf, sized in shares equal my portfolio's volatility and that's the amount I use for a full hedge that i put on and off. this is all in reference to a retirement etf modeled after your book Smart Portfolios. thanks.
DeleteWell I strongly dislike inverse ETFs....
Delete... and unless you are only going short for a couple of weeks the holding cost of an inverse ETF is likely to far exceed the transaction costs of selling and rebuying.
Delete