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Heartwood launches ethical accounts


Research published earlier this year from GBP2.8 billion Heartwood Investment Management revealed that one in four IFAs has seen an increase in client demand for globally diversified ethical investing over the last few years, while just two in five were satisfied with the current range of ethical investment options on offer.

Tackling exactly these issues is a new initiative from Heartwood which has launched segregated accounts invested in an ethical manner. Ben Matthews, (pictured), investment associate, and Matt Hollier, head of investment product, explain that ethical investment is an area that the excites the firm.

Just over three years ago Heartwood Investment Management was bought by Handelsbanken and now services the bank’s branch clients and wealth management clients and has doubled its assets under management. The firm specialises in multi asset investing.

Hollier says: “Not much has changed since our purchase since we continue to be a global multi asset manager with a range of solutions on the risk return spectrum. We have by and large the same capabilities but we always like to find new areas and ethical is an area we are excited by.”

Hollier says that they were aware that a lot of clients were concerned about ethical issues but equally clients like risk profiled investment solutions. “What has not been on offer in the past is something that brings those two things together,” he says. While formerly, ethical investment products have been restrictive or available only in a single asset class, it didn’t suit Heartwood. “If you take that approach you lose a lot of the risk control and return profiling that comes from a genuine multi asset solution,” Hollier says.

“But the market in underlying instruments has become more sophisticated and we feel there are enough building blocks that we can build an ethical investment solution that fits within our approach,” Hollier says.

Heartwood offers a range of funds in defensive, cautious, balanced and growth pools and the new ethical products are now available in the balanced and growth section but crucially maintain the ethical propositions with the same overall risk return profile. Investment associate Matthews has been working on the ethical project for some two years and the segregated accounts have been running since the end of March.

“Our starting point was that we are global multi asset investors,” Matthews says. “We had to minimise compromise with an ethical and socially responsible investment (SRI) slant so we have gone for an integrated approach, combining negative screening of specific sectors such as tobacco, defence or gambling with the more positive SRI or environmental, social governance (ESG) investments such as climate change or social impact.”

The majority of the portfolio is screened for the negatives, as it were, such as tobacco and armaments, and then combined with positive factors such as solar energy, water and a social bond fund.“It is a mixture of active and passive and direct asset classes,” Matthews says. “In the past there wasn’t the optionality in terms of asset classes to replicate what we do in the fixed income part of our portfolios but we have been able to introduce new asset classes and mimic what we do on a day to day basis. The target was to reproduce the same risk return profile of our balanced and growth portfolios with the ethical strategy and we have been successfully achieving that.”

Hollier says: “We are aware from talking to our private clients and IFAs that there are a lot of investors who would like to have their ethical portfolios but don’t want to trade that off, but if you can say ‘we can give you a high quality product but built around ethical concerns’, across the age spectrum there is high untapped demand.”

The firm is interested in launching an ethical fund going forward.

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