My values, my money.
What do your clients stand for, and how can their portfolios reflect that?
Josh Persky
Founder and CEO
One doesn’t have to go too deep into a newspaper to see that the level of dissent in Australia is rising. Whilst protests have been very much part of Australia’s history since the first fleet, disagreement continues to shape both social and cultural change. Be it the war in Ukraine, climate change, conflict in the Middle East, the rising cost of living and housing prices, there are many complex issues that Australian’s feel passionate enough about to protest in the streets, or simply utilise the global reach of social media to espouse their personal views.
Much has been written about investors tallying the impacts of climate change, and how best to manage their portfolios (and protect their investors) against future risk and damage. This process of active ownership (or stewardship) involves large, institutional investors seeking to use their influence to drive and shape long-term value over companies they are significant shareholders in.
Less is written about activists demanding superannuation funds, insurance companies, fund managers and boards divest from certain countries, sectors and even specific securities. It is not that uncommon to read of activists storming the office of a global fund manager, protestors gluing themselves to the road or even shutting down major highways completely.
We all want to live our lives according to our own set of values, as well as have our institutions do so as well. One vital element that many of these protests all have in common is often forgotten. Money.
With significant advancements in portfolio management technology, what many investors fail to realise is that they themselves can remove stocks that they dislike all on their own. Many investors we speak with daily have their own unique and idiosyncratic views on “bad corporate actors” that they can (and are) seamlessly divesting from.
This process can often seem counterintuitive to most people. If protesting outside the office of your superannuation fund to remove a stock or a sector from the fund results in no change to the portfolio at all, what good would a phone call to a fund manager asking them to remove the same stock from the portfolio just for you achieve?
This is where Direct Index technology really comes to the fore. Financial technology providers buy stocks in a particular index (e.g. S&P/ASX200) on the investor’s behalf, where every share is beneficially owned (unlike units in a trust like an ETF or managed fund). Not only can the investor have the portfolio tailored to their own values and ESG preferences, as they own the stocks themselves, the ability to manage each portfolio efficiently on an after-tax basis can result in better outcomes unavailable to ETF or mutual funds unit holders.
Furthermore, Direct Indexing technology can further offer screens for investors and institutions looking to avoid entire sectors, be it adult entertainment, alcohol, gambling, thermal coal and controversial lending practises. Whilst removing exposure to these sectors seems simple in theory, the reality is far different. Utilising the most reputable data providers in this space ensures each investor can apply his or her own business activity screens to manifest in an investment program built just for them.
Investors can now have their money managed how and where they want it too. Professionally, transparently and at low cost. Placards not required.