Discretionary fund manager provider Parmenion today unveiled the introduction of a new global bonds asset class for its Strategic Ethical Active D investment solution.
Strategic Ethical Active D is Parmenion’s strictly screened ethical portfolio, aiming to minimise exposure to companies involved in controversial activities. It has a track record going back to 2012 and is 5 diamond Defaqto rated.
Global Bonds will feature as an asset class for the first time in Risk Grades 1-9, as a way to improve diversification and reduce risk, with a positive environmental footprint.
With a focus on diversification, this new Global Bonds category has been introduced as a defensive asset most specifically for the low and middle risk grades, enabling the portfolios to hold a lower allocation to managed liquidity and corporate bonds and include more in equities, with no increase in expected risk levels.
This approach will enable better integration of ethical screening from the funds chosen, improved expected risk-adjusted returns and help to ensure performance is more consistent with Parmenion’s other investment solutions. The new Global Bonds asset class will also introduce an allocation to sovereign green bonds. For inclusion in the Strategic Ethical Active D portfolio, these bonds must meet strict ethical screening criteria, including avoiding exposure to tobacco production, nuclear power and fossil fuels production.
While Parmenion uses government bond duration in other portfolios as a tool to defend against periods of equity weakness, up to now, government bonds have not passed ethical screening to be included in the Strategic Ethical Active D due to exposure to weapons spending. With the addition of green bonds for the first time, the portfolio can now select from a wider range of investable bonds currently offering attractive yields in the region of 3%. The green bonds in the portfolio are used to finance a range of projects across renewable energy, energy efficiency, green buildings and clean transportation.
Mollie Thornton, senior investment manager at Parmenion said: “Global bonds are the cornerstone of any diversified portfolio, but not all bond types, especially those issued by governments, pass strict ethical screening. We’re delighted to be able to expand our bond exposure by adding sovereign green bonds to the Strategic Ethical Active D portfolio for the first time.
"With solid risk-adjusted return potential, diversification benefits, and positive environmental outcomes, green bonds should be an important addition to the portfolio.”
Parmenion is also consolidating the corporate bond asset class for Strategic Ethical Active D to focus on its three highest-conviction funds: Rathbone Ethical Bond; Aegon Ethical Corporate Bond; and Liontrust Sustainable Future Corporate Bond.
