The following content is sponsored by MSCI
Differentiated Insights Lead to a Stronger Financial Portfolio
How can wealth managers build better portfolios for a better world? It all begins with the right insights. Using risk and return analytics, along with climate and ESG considerations, wealth managers can:
- Propose compelling solutions
- Build stronger portfolios
- Monitor portfolio performance
In this graphic from MSCI, we show how financial portfolio insights help a wealth manager meet their clients’ needs at each step of the process.
Insights in Action
Let’s look at how these benefits take shape for a hypothetical client and their wealth manager.
- Client: Faye
- Investable assets: $1 million
- Risk tolerance: Medium
- Preferred strategy: ESG integration
Given this profile, a variety of financial portfolio insights will help Faye understand how a new solution meets her needs.
Build a Strong Financial Portfolio
In the first stage, the wealth manager will begin building a model portfolio by conducting research and risk/return analytics. A stress test shows that the constructed model portfolio would have performed better than its benchmark during historical market downturns.
|Downturn Event||Portfolio Return||Benchmark Return|
|Global Financial Crisis (2007-2009)||-34.7%||-36.4%|
|Oil Crisis (1972-1974)||-29.3%||-31.4%|
|Argentine Economic Crisis (2000-2002)||-23.9%||-24.2%|
|Dot-com Slowdown (2001)||-22.2%||-24.2%|
|Market Crash (Oct 14-19, 1987)||-15.0%||-16.9%|
Financial portfolio construction can also include analyzing exposure to factors, or the investment characteristics that drive risk and return.
To take ESG into account, the wealth manager compares an ESG model portfolio to one of their (Read more...)