Denver-based First Ascent Asset Management, a turnkey asset management platform that charges a flat fee, has launched a series of portfolios for advisors whose clients want access to environmental, social and corporate governance focused investment portfolios.
The ESG Global Core portfolios offer advisors and clients access to the investments at five risk levels, ranging from a conservative 20% equity to aggressive 100% equity. There are also tax-sensitive versions of the portfolios available.
The portfolios invest primarily in passively managed exchange traded funds that track ESG indexes, but CEO Scott MacKillop said the firm would explore adding more actively managed funds in the future. MacKillop said the firm surveyed advisors and found most felt their clients didn't have specific causes or issues they wanted to focus on with their investments, but wanted a higher ESG score for their portfolios. The TAMP created broadly diversified portfolios that closely track its other portfolios but with a higher ESG tilt.
Some of the ESG funds have higher expense ratios than the non-ESG index products the firm typically uses; the ESG funds range in price from 13 to 42 basis points, MacKillop said.
First Ascent was one of the first asset managers to charge a flat fee for its portfolios, and that will continue with the ESG versions. Clients pay 35 basis points up to $400,000 in assets, and after that, a household cap of $1,400 a year kicks in. For advisors who just want the investment model and will handle the account administration and opening themselves, the cap is $1,200.
The TAMP is also looking to add a direct indexing capability in the next couple of months where a higher level of customization is allowed, but MacKillop is still working to identify the right software provider.
“Our portfolios are all ETF and mutual fund based, so there’s some limits to the amount of customization that we can do,” he said.
The direct indexing provider would act as the separate account manager, while First Ascent would pick the risk levels and indexes to track, as a subadvisor.
MacKillop said his firm decided to launch the ESG portfolios out of advisor demand, but they went about choosing the investments very carefully—keeping performance and fees top of mind.
“It’s a tricky area, because all the (ESG) definitions and data sources are all over the map, in terms of how they see the world,” he said. “We’ve tried to tread pretty cautiously and stick to using products which have a good solid basis from multiple data sources.”
“We want to respond to the ESG demand, but we don’t want to do it at the cost of creating either very expensive portfolios or portfolios that are going to perform oddly.”
He believes the portfolios they’ve created will take care of 75 to 80% of the ESG needs of First Ascent’s advisors. The firm has over $1.1 billion in assets and agreements with about 150 advisors.
MacKillop launched First Ascent in 2016, after a long history in the TAMP space, with the goal of challenging the price orthodoxy in the investment space with the first flat-fee outsourced investment management offering for retail advisors.
