We launched the EQ Future Leaders Portfolios in February 2020 with three ambitions:

• to deliver market returns that are comparable to legacy incumbents
• to be uncompromising in the way we delivered sustainability
• to avoid incurring the high fees associated with active management.

It is therefore a significant validation of the progress we are making on these ambitions as the portfolios have just been awarded ‘Best Sustainable Portfolio Range’ at the 2022 Investment Week Sustainable Investment Awards.

We are very proud to be recognised by the judging panel as “leading the way in providing best-in-class” solutions, and that our drive to “push asset managers [to] constantly improve their products” is feeding through to real changes in our investment universe.

Bringing an element of active management to a passive solution

Unlike other passive solutions, we tactically adjust the portfolio through the cycle to take advantage of arising opportunities and to limit potential downside. These opportunities will often be ignored by peers with static asset allocations.

This separation of active asset allocation and passive fund selection allows more control over portfolio exposures, without compromising on key features of a passive portfolio such as diversification and cost. Two examples of how we have implemented this are in exposures to long-term secular trends, and how we have made the portfolios more defensive in an uncertain environment.

In a more turbulent economic environment, our active asset allocation approach allows us the flexibility required to take a more defensive stance. While peers with static allocations have stood firm, we have taken steps this year to significantly reduce risk in our fixed income allocation, focus on short-dated bonds and materially increase our cash allocation. This has insulated us from the volatility that has spilled into government bond markets in recent weeks.

ESG Leaders and sustainable themes

With our 10-year track record in impact investing, there are many experiences we can bring across to the EQ Future Leaders Portfolios – particularly regarding how we think about investing in ESG leaders and in themes. Time and again, ESG leading companies have shown how they can not only beat the market during benign economic environments, but also offer a layer of protection during market downturns – a crucial characteristic when helping our clients plan for their futures.

Since launch, we have also favoured exposure to sustainable themes, and have continually looked to develop and refine how we achieve this. Our thematic investments including digital security, the health care revolution, and clean energy have been positive contributors to portfolios performance since launch.

Looking forward

Despite the gloom, we think there are many things to be optimistic about in the coming quarters and years. There is no doubt that each crisis will present new challenges, but it is when we are pressed that innovative solutions emerge that showcase humanity’s ingenuity.

We launched the EQ Future Leaders Portfolios on the eve of pandemic lockdown which triggered the deepest economic contraction in a century. During the darkest days, who could have forecast the speed at which not one, but three vaccines were developed?

There is no doubt that this year has presented some challenging market conditions for all market participants. Within sustainable funds, several commonly excluded industries such as oil & gas and tobacco have rallied to multi-year highs as markets have sought secure, short-term cash flows. Nevertheless, our exposure to a mix of high conviction, long-term sustainable themes and high-quality, well run ESG leading companies has helped overcome some headwinds to deliver market beating performance.

If you would like to learn more about how we manage portfolios, please get in touch to arrange a free consultation with one of our financial experts.