Canadian digital wealth manager Wealthsimple has rolled out Socially Responsible Investing (SRI) portfolios in the UK. SRI portfolios invest in companies that make social responsibility a business priority.
In Wealthsimple’s case, the portfolios invest in exchange-traded funds (ETFs) containing securities from global environmental, social, and governance (ESG) companies, sustainable bonds, companies involved in clean energy, and UK government bonds for risk control.
The company's fees are the same as for standard portfolios, 0.5-0.7%, but the fees charged by the funds themselves are around 0.1% higher. The minimum investment required is £5,000 ($6,880).
Here is why the launch might be a success:
- Customers want to invest in SRI portfolios. In the UK, 60% of investors want to invest their money to make a positive contribution to society and the environment, and Wealthsimple itself has stated that the launch comes in response to customer demand. Additionally, SRIs are less prone to panic selling, according to Wealthsimple. Therefore, it seems that Wealthsimple’s new launch will see high demand in the UK market.
- Wealthsimple has experience with SRI portfolios. The company launched SRI portfolios in Canada in 2016, and half of all its new customers in the country have opted to invest in an SRI portfolio since, the company claims. Additionally, Wealthsimple's Balanced SRI Portfolio saw returns of 13% in the same time that its Balanced Portfolio grew around 15%, indicating the service is already seeing success.
However, while there will likely be high demand in the UK for the new service, its long-term success remains to be seen. Wealthsimple’s experience with SRIs and demand for them in the UK makes it likely that the launch will see an initial success. However, SRI portfolios are often less diverse than standard ones, making them more risky and therefore their returns potentially lower. So, while people may initially choose to invest in SRI portfolios, their loyalty to this choice largely depends on the future satisfaction of returns and pricing from users.
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