Driving out to Fort Mills, South Carolina, my first meeting of the day was with LPL Financial, the largest independent broker-dealer in the country. Walking into its newly built 450,000-square-foot campus, I almost got lost but after a wrong turn or two found my way to reception to wait for Joey Rackley, vice president of research at the firm.
Rackley, who heads up the traditional due diligence team at the $509 billion broker-dealer, told me how his team had recently added a string of enviormental, social and governance (ESG) funds to its recommended list and discretionary models in response to increased demand for this type of strategy.
‘This is the first time we’re explicitly making an attempt to add socially conscious funds to the list where we think they can be competitive regardless of the ESG screens,’ he said.
LPL’s addition of ESG funds is part of a wider trend within the industry, reflecting growing client demand for these strategies.
In an interview with Citywire earlier this year, Merrill Lynch gatekeeper Anna Snider said the wirehouse had 22 ESG funds on its recommended list and was looking to add to this number in 2017.
In March, Morgan Stanley launched two sustainable investment-focused model portfolios, with account minimums of $10,000.
The rest of Rackley’s team was able to join us at the end of our meeting for a photo.
Taking an Uber back to downtown Charlotte, my next meeting of the day was with Todd Rabold at Abbot Downing, a multi-family office that is part of Wells Fargo. Luckily for me, Rabold was in Charlotte for the day, but he’s usually based up the road in Winston-Salem.
Rabold is a regional chief investment officer, managing the investment team, working with a select number of clients and acting as spokesman for the office. Abbot Downing serves 600 clients nationally and advises on $42 billion in assets. The investment team focuses on the ultra-affluent and the foundation and endowment market, maintaining a low client to advisor ratio of 15-20 clients per advisor.
Like LPL, the firm has experienced demand for socially focused investments as clients increasingly focus on how they can be good stewards of their wealth and make a positive impact on communities.
Demand has come from both institutional clients and families, particularly from the younger generations, Rabold said. The firm offers customized socially responsible investment and ESG programs that generally include at least one of the following components: portfolio policy (negative screening), ESG integration (positive screening), corporate engagement through shareholder advocacy programs and impact investing (more focused, private placements).
These offerings reflect growing client demand for these strategies in the North Carolina area, Rabold said.
Rabold has also seen demand for alternatives, particularly private equity funds. ‘With the low return environment we are in today, trading liquidity for higher return opportunities continues to be interesting for larger and more sophisticated clients,’ he said.
Fortunately, my next meeting was with Wells Fargo in the same building, so I had time for a quick picture in front of the famous carriage before heading on to catch up with the wirehouse’s alternatives team.
I met Tim Wood, who is a part of the global manager research team at the Wells Fargo Investment Institute. The global manager research team puts together a list of strategies that is then used by broker-dealer Wells Financial Advisors, Wells Fargo Private Bank, Abbot Downing and pension service Institutional Retirement Trust.
The team is structured by asset class rather than investment vehicle, so analysts evaluate strategies in mutual funds, exchange-traded funds, separately managed accounts, unified managed accounts, closed-end funds and hedge funds.
On average each analyst covers around 40 long-only strategies and around 15 in the alternatives space. The institute is spread out, with offices in Hong Kong, London, St. Louis, Charlotte, San Francisco, New York, Raleigh and Denver.
Wood is a part of the alternative investments team headed up by Hazlitt Gill. The focus for Wood at the moment is on finding event-driven and relative value managers, which Wood said had proved a difficult task given disappointing recent performance in these sectors. The team is also focusing on rationalizing the platform for the Department of Labour fiduciary rule.
My name is Amelia Garland and I am a relationship manager at Citywire. My aim is simple: to get to know the professional buyers across the US and engage with heads of manager research and due diligence, directors of investments and anyone who selects third-party products for their platform.
I am constantly on the road, if you would like me to pay you a visit, please don’t hesitate to get in touch at firstname.lastname@example.org or give me a ring at 646-532-6301. Don’t forget to tweet too @GarlandGoesWest. Next stop Denver!