Dimensional launches ESG separately managed accounts


Glenn Crane

Australians wanting a one-stop, low-cost, sustainable and systematic investment solution now can access model portfolios from Dimensional Fund Advisors via separately managed accounts (SMAs) available through Macquarie Wrap.

Dimensional, a global systematic asset manager, has brought together its global equity and fixed interest sustainability solutions into three automatically rebalanced model portfolios, ranging from a 100% high growth option, to an 80%-20% growth-defensive split and a traditional 60%-40% balanced allocation.

At an all-up cost of just 50 basis points, these are fully integrated environmental, social and governance portfolios. They have the dual objective of delivering meaningful environmental and social outcomes, while outperforming benchmarks via a systematic investment approach.

Sustainable fund assets grew by 12% globally in the second quarter to $US2.25 trillion, according to Morningstar, with Australia among the fastest growing markets. Also growing in popularity locally are SMAs, which offer greater control, transparency, tax optimisation and cost-effectiveness.

“More and more investors in Australia are wanting to invest sustainably without compromising good investment outcomes and while keeping costs low,” says Dimensional’s Australian CEO Glenn Crane. “So these solutions set within that structure are going to make sense for a lot of people.”

At a time of rising compliance costs and other regulatory imposts, the SMA structure also offers significant efficiencies for financial advisors, who do not require a special licence to use them or need to issue ongoing statements of advice to clients accessing the portfolios.

Once the investor is in the SMA, rebalancing occurs automatically and is administered by the wrap platform. No additional documentation is required.

The investment approach in the model portfolios is consistent with Dimensional’s underlying funds, providing a systematic focus to pursuing higher expected returns across global equity and fixed interest markets, while maintaining broad diversification and managing costs.

The ESG filters seek to substantially reduce portfolio exposure to greenhouse gas emissions and reserves, while targeting a range of social considerations – including gambling, tobacco, child labour, nuclear weapons and factory farming. Added to this is strong governance oversight.

“Our aim is to target specific sustainability characteristics that investors can understand and compare to industry standards,” Crane says. “We believe this approach enables more transparent reporting on investment and sustainability metrics relative to benchmarks.”

Dimensional recently was named by the Responsible Investment Association Australasia as a “responsible investment leader” – a designation preserved for managers with a commitment to responsible investment, a systematic process to ESG, strong stewardship and a record of allocating capital to benefit stakeholders.

Founded in the US 1981 and present in Australia since 1994, Dimensional is a wholesale asset manager with a long history of applying academic research to practical investing. The company now manages more than $800 billion from 13 offices globally, including about $45 billion for clients in Australia and New Zealand. Its clients are institutional investors such as super funds and independent advisors.

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