What happened in portfolios
Patrick McLaughlin
Head of SRI Multi Asset Solutions
Offering update
As we discussed in last month’s letter, the names associated with our Responsible Investment (RI) offering changed in May under new ESMA Fund labelling guidelines. The name changes are outlined in the table below:
To reiterate, we emphasise that the only element changing is the name. The offering remains classified as Article 8 – Promoting E/S Characteristics under EU SFDR. The binding elements of the fund continue to concentrate on the same areas as previously. Furthermore, the investment process and its philosophy remains unchanged. We are happy to respond any queries you may have on the name change.
Performance update
Global equity markets continued their recovery in May, as consumer sentiment improved and the imminent threat of sweeping tariff hikes receded.Global equities rose by 6.0% (in euro terms),while global RI equities rose 7.1%. Global bonds declined by 0.5%, despite generally encouraging inflation data. Countries facing greater fiscal pressures, such as the US and UK, underperformed. In contrast, markets in countries that have taken steps to address debt and deficits—such as Spain and Italy—posted positive returns.
For the first time since February, all portfolio strategies delivered positive monthly returns, ranging from +1.7% in Social Focus Cautious Core portfolios to +4.2% in the Social Focus Long Term Growth portfolio. Returns in the Social Focus GPS range followed a similar pattern, Social Focus Cautious GPS +1.7%, Social Focus Moderate GPS +3.5% and Social Focus Long Term Growth GPS +5.0%.
Despite the recent rebound, global equities remain down 4.3% year-to-date (in euro terms), global RI equity -5.1% Bonds have returned 1.1%, helping to cushion the impact of equity market weakness. As highlighted in previous updates, our diversified allocation to alternative asset classes—including gold and liquid diversifying strategies have contributed positively. Tactical positioning, particularly our overweight to European equities and underweight to the US dollar, has also contributed positively.
Year-to-date, Social Focus Cautious Core portfolios have gained 1.2%, while the Social Focus Moderate Growth and Long Term Growth Core portfolios have declined by 0.8% and 2.0%, respectively. Across the Social Focus GPS range, year-to-date returns are as follows, Social Focus Cautious GPS +0.4%, Social Focus Moderate GPS -0.8% and Social Focus Long Term Growth GPS -1.7%.
Portfolio changes
As Donough noted, the equity overweight call initiated in April was closed in May following the partial rollback of tariffs and the subsequent strong rally in equity markets. We returned equity exposure to neutral (52% in Social Focus Core Moderate Growth & 52% in the Social Focus Moderate Growth GPS fund) and reallocated proceeds to global government bonds, locking in a 12.5% gain versus the funding source (Global Government bonds) in the Social Focus Core portfolio.
Source: Bloomberg & Davy, in Euro. Data as of 31st of May 2025. Chart data is indicative only. Actual performance and investment timing in client portfolios may differ.
In adjusting equity exposure, we retained the Amundi Index MSCI World SRI Filtered PAB Euro hedged fund - originally used for the overweight - and instead lowered the allocation to the unhedged Amundi Index MSCI World SRI filtered PAB fund. This adjustment also served to maintain a US dollar underweight across portfolios.
During May, our Investment Strategy team proposed a Latin American equities call across all Davy offerings. However, the Responsible Investment Committee did not view the call as in keeping with our responsible investment range. This was mainly due to exposure to companies in the materials sector that did not adequately meet ESG criteria.
Following the changes, portfolios have a material underweight to the dollar across risk profiles. The underweight is relative to a neutral strategic (or long-term) weight, as per the Strategic Asset Allocation (‘SAA’).
Source: Bloomberg & Davy, as at 31st of May 2025.
SAA = Strategic Asset Allocation
TAA = Tactical Asset Allocation
Note: The chart represents an estimate of US dollar (USD) exposure across the GPS funds range. The tactical asset allocation (TAA) or current tactical exposure to USD is calculated using a bottom-up, look-through approach across all portfolio holdings. This methodology captures tilts from tactical calls and active manager positioning. Exposures may vary over time.
Recent weeks have underscored the value of maintaining flexibility and the ability to adapt portfolios swiftly in response to a rapidly shifting macro environment. While market volatility has moderated somewhat, the outlook remains uncertain across key areas such as global trade, fiscal policy, inflation and economic growth — all of which have significant implications for investor sentiment and corporate earnings.
In this context, maintaining a well-diversified portfolio remains essential. Equally important is positioning to capture potential upside surprises that could further support equity markets. Striking the right balance between risk management and opportunity will continue to be a central focus of our investment approach.
If you have any questions on portfolio changes, exposures or positioning, please contact your adviser.
Responsible Investing in the News
In May, BNP Paribas published the results of an ESG survey conducted in late 2024/early 2025. Approximately 90% of institutional respondents reported that they were not altering their commitments to sustainable investing, despite fresh geopolitical pressures. However, some are being less vocal about their activities.
The key findings of their survey were:
- Unwavering commitment to ESG objectives, despite a lower level of advocacy
The vast majority of respondents (87%) say their ESG and sustainability objectives remain unchanged, while 84% believe the pace of progress of sustainability is either going to continue or accelerate between now and 2030.
- Continued ESG considerations in investment decisions, moving away from generalist ESG investing
85% of respondents say they integrate sustainability-related criteria into their investment decisions, with 59% performing thematic investing.
The top 3 primary sustainability/ESG objectives in the next two years for the respondents are:
- Increasing allocations to energy transition assets (49%);
- Using active ownership to advance their own organisation’s ESG goals (47%); and
- Investing in low-carbon assets while divesting from carbon-intensive assets (46%);
- More sophisticated approach – integrating climate, biodiversity and social impact themes into strategies
Investors are increasingly allocating to specific themes or regions to help identify opportunities for impact and alpha, and focus their expertise into generating better outcomes.
Based on the survey’s key characteristics framework, 19% of respondents have been identified as “pacesetters” – the more advanced type of investors in sustainable investing. These leaders are putting much greater emphasis on portfolio decarbonisation (95%), social issues (94%), just transition (68%), and biodiversity (86%) in their investment strategy.
- Emergence of private capital managers in sustainable investing
51% of the responding private capital managers expect to use active ownership to fulfil their ESG goals and are placing more emphasis on social issues (76%) and just transition (63%).
Most private capital managers believe ESG investing can add value, improve alignment with asset owners, satisfy their stakeholders and enable them to benefit from investment themes around decarbonisation and the shift to a low-carbon economy.
- Strategic banking and data partnerships to navigate the transition
The top criteria for investors when selecting an external banking services partner are:
- Brand reputation on ESG / sustainability (51%);
- Availability of products and expertise (40%);
- Commitment to long-term client relationship (33%); and
- Shared sustainability commitments (33%)
To support their aim to access and generate reliable ESG data, nearly half of investors (48%) anticipate allocating more budget to their sustainable investment strategy on ESG data acquisition and analysis.
Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. These products may be affected by changes in currency exchange rates.
Warning: Forecasts are not a reliable indicator of future performance.
