CASE STUDY

A Partner on ESG Portfolio Solutions

Comprehensive expertise and broad investment options enabled us to help a key partner deliver for advisors and clients.

Background

A large multi-client distribution partner was interested in developing multi-asset-class model portfolio solutions for its private clients across varying risk profiles and tax objectives that incorporated high levels of environmental, social and governance (ESG) integration from the underlying investment managers. The selection of each elected strategy would require extensive due diligence across traditional investment metrics, along with a deep understanding of the role ESG criteria played in its portfolio construction process.

Client Objective

The client was seeking a broadly diversified portfolio across global asset classes, with dual objectives:

  1. Achieving attractive risk and return characteristics
  2. Allocate to strategies that are able to demonstrate ESG integration and show total portfolio ESG metrics relative to the underlying indices

Asset allocation targets would be set by the partners chief investment officer to provide a consistent approach to diversification, while the selected “ESG partner” would be responsible for manager selection and ongoing portfolio management. We believed our wide universe of available investment options—incorporating both active strategies managed by Neuberger Berman and passive solutions managed by third-party advisers—would provide a scalable solution to address multiple portfolio objectives and help achieve commercial success for the broker-dealer’s financial advisors and their clients.

NB Private Wealth Solution

Neuberger Berman’s Multi Asset Class team and Investment Strategy Group was ultimately chosen for this role as the ESG Partner given our experience and product offerings—leveraging our broad-based firm capabilities to provide insights into the final portfolios that were presented and ultimately selected.

While each portfolio was reviewed and chosen for its specific merits, our firmwide dedication to ESG investing and the capability of our independent ESG team were also highlighted by the client as determining factors in the win. Based on the asset allocation targets provided by the client’s CIO, we selected managers across multiple offerings to ensure the inclusion of what we viewed as best-in-class options. In addition to employing traditional analysis around investment process, philosophy and performance, we engaged each manager to assess the how consideration of ESG characteristics were incorporated into investment decisions.

While evaluating third-party managers, we determined that the optimal solution would include our internal high-conviction active strategies across multiple asset classes, complemented by low-cost passive options in certain asset classes. This allowed what we viewed as more efficient beta exposure to be paired with the alpha generation potential of the chosen active funds.

As part of our ongoing management of the portfolios and engagement with the distribution provider we continue to introduce our firms best thinking around different strategic asset allocations, which incorporate ESG integration, and discuss ways the underlying portfolio managers can provide relevant ESG metrics and commentary on their strategies.

Other Insights

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