What defines all Next Economy portfolios?

Public Equities, Long Only

Where money moves in the economy is where real change occurs. And since publicly-traded equities are typically an investor’s largest asset class, it’s their best opportunity to generate impact. Further, equity markets are lagging indicators to what’s happening throughout the economy, so a forward-looking investment manager can buy companies poised to grow rapidly as they gain market share.

Solutions Creators

Every portfolio company is selected for their ability to deliver innovative solutions that simultaneously address our biggest systemic risks – climate change, resource scarcity and widening inequality – and improves economic productivity. We intentionally select each stock as a solution to a given risk, or interconnected set of risks, based on the products/services from which they earn revenue.

Fossil Fuel Free

No investment portfolio should contain the causes of global systemic risks. Securities of fossil fuel companies represent substantial portfolio risk commensurate with the global risks caused by their products. We have never invested client portfolios in fossil fuels because they are simply not a growing part of the present economy, nor will they play a meaningful part in the Next Economy.

Diversified Growth Stocks

We look for companies delivering solutions wherever we can find them – across the globe, in firms of all sizes and in every industry. Companies fulfilling growing demand for products and services that transform how society prospers represent the biggest business opportunity of the 21st century; therefore they are the vehicles creating growth in the economy – and in our investment portfolios.

Fundamentals-Driven

The price you pay matters. Once we’ve found genuinely sustainable companies, we vet their business strength, growth prospects and the price one has to pay for the stock versus its near-term growth expectations. Our goal is to deliver portfolios to our clients that consist of stocks offering higher growth prospects, bought at less expensive valuations than their peer companies.

Which Next Economy portfolio matches my investment goals?

It’s important to know what all Green Alpha portfolios have in common – it’s also important to understand what’s unique about each portfolio. Shown below are select variables to consider, as well as explanations in the FAQ of what we believe to be material in selecting a portfolio for yourself or a client.

Portfolio
Portfolio Fact Sheet
Strategy
Vehicle
Minimum Investment
Number of Stocks
Beta*
U.S. vs. International*
Dividend Yield*

Next Economy Index

Q3 Fact Sheet »
• Passively managed
• Our most diversified portfolio
Separate Account
$100,000
~ 100+
1.15
• U.S. Domicile: 70%
• Non-U.S. Domicile: 24%
1.12%

Growth & Income Portfolio

Q3 Fact Sheet »
• Actively managed
• High current income
Separate Account
$100,000
25 – 35
1.09
• U.S. Domicile: 70%
• Non-U.S. Domicile: 28%
4.18%

Sierra Club® Portfolio

Q3 Fact Sheet »
• Actively managed
• Sierra Club’s proprietary environmental & social criteria
Separate Account
$10,000
30 – 40
1.35
• U.S. Domicile: 65%
• Non-U.S. Domicile: 32%
1.27%

Next Economy Select**

Q3 Fact Sheet »
• Actively managed
• Mutual fund style
Mutual Fund, Separate Account
$500, $1,000, or $1,000,000**
45 – 65
1.15
• U.S. Domicile: 59%
• Non-U.S. Domicile: 29%
1.74%

Nia Global Solutions

To learn more about this portfolio, please visit Nia Impact Advisors’ website
www.niaglobalsolutions.com
• Actively managed
• Gender diversity lens
• Green Alpha sub-advises this portfolio for Nia Impact Advisors
Separate Account
$100,000
30 – 50
1.28
• U.S. Domicile: 76%
• Non-U.S. Domicile: 24%
1.42%
*As of 9/30/17
**The Next Economy Select portfolio is offered either as a Separate Account or Mutual Fund (Shelton Green Alpha Fund, ticker: NEXTX).
Minimum investment in the Mutual Fund is $500 if you have an Automatic Investment Plan and $1,000 for all other accounts. Minimum investment in a Separate Account is $1,000,000.

 

FAQ


Passively vs Actively Managed

Regardless of which Green Alpha portfolio you might be thinking about, every stock purchased and held is actively researched, analyzed and rated using the same Next Economy investment process, so what does the financial industry jargon of “passively traded” and “actively managed” mean?

Passively managed:  By this we are referring to two things.

  1. After we’ve decided which stocks will be purchased and held within the portfolio, each stock’s weighting is determined by its market capitalization, or size. Bigger companies get larger weightings within the portfolio than smaller companies. This is simply a different weighting methodology than active portfolio management where a portfolio manager’s conviction in a specific stock determines its weight. Weighting each stock by size within the portfolio is how indexes are typically managed.
  2. In addition to ‘passive’ weighting of stocks within the portfolio, we only trade the portfolio once a year, which is also typical of index management methodology. In this way, we say that the Next Economy Index is passively traded. During the course of the year we allow each stock’s weighting in the portfolio to fluctuate with stock price movements, and only trade the stocks within the account once a year.

What might be some potential ‘pros’ of passive management? We choose to passively manage the Next Economy Index because it benchmarks the evolution of the Next Economy — the unfolding, solutions-oriented, innovation-driven, highly efficient economy. By taking a largely hands-off approach to the portfolio holding weights and trading activity, clients can experience how Next Economy companies are developing in the market. That also means lower fees for you as our management fee rates on this portfolio are lower, in general, than the actively managed portfolios. In addition, if you choose to have an account held by a custodian who charges fees based on number of transactions, trading less frequently can help ensure you are not paying unnecessarily high fees to the custodian.

Actively managed: As you can imagine from what’s written above, when we talk about a portfolio that is actively managed, we are referring to two things.

  1. We select each stock’s weighting in the portfolio based on our conviction. That conviction is influenced by a host of variables that are too innumerable to list here.
  2. We also trade actively managed accounts throughout the year. So, if a stock has experienced outsized gains, we might take profits by selling some of the stock for clients, or we might decide to let that position keep growing. We have low turnover rates vs many other investment advisors, and we never want clients to incur unnecessary transaction fees so we weigh all of the information at hand when deciding when and how much to trade each portfolio.

Mutual Fund vs Separate Account

To begin, we suggest you read the Investopedia’s mutual fund and separate account descriptions.

Why might you choose one over another? If you have a smaller amount to invest, a mutual fund might be your least expensive option. Nobody wants excess fees to cut into their ability to create and build wealth with their investments! In addition, mutual funds are easier to purchase than the process of opening a ‘separate account,’ where Green Alpha is buying and selling each stock specifically for you. However, separate accounts can be less expensive than purchasing a mutual fund, depending on how much you want to invest and where you prefer to hold your account or mutual fund.

If you’re trying to decide which portfolio might be right for you, please consult your financial advisor, or provide us with enough information to share portfolio-specific facts with you. Please note: while we are happy to answer your questions and help you understand how we manage our investment portfolios, we do not carry out comprehensive financial planning services and we do not provide advice on portfolios that are not managed by Green Alpha. Therefore, we are not equipped to help individuals create a holistic strategy to meet their financial goals.

Minimum Investment

We strongly believe in democratizing access to quality investment options, so we keep our minimum account sizes as low as possible. The minimums stated above are ‘standard’ minimum account sizes that apply regardless of which custodian you choose to hold your account assets. However, there are custodial platforms where we have more flexibility to open smaller accounts, because of how they charge fees and whether their technology enables us to purchase fractional shares or not.

If you like a particular Green Alpha portfolio, but cannot meet the minimum account size listed above, please don’t hesitate to inquire with us about your options. As is the case with all investment decisions, please consult your financial advisor to see how a given Green Alpha portfolio might fit into your overall portfolio allocation strategy.

Asset Management vs Financial Planning/Wealth Advice

We are well aware that there is too much jargon in financial services, and this can create barriers to individuals taking action with their assets. Here we attempt to clarify the role of an “asset manager” versus a “financial planner” or “wealth advisor.”

We at Green Alpha perform “asset management.” At Green Alpha, this simply means we pick individual stocks to build portfolios. How these stocks are added to a portfolio depends on the portfolio’s specific construction goals.

A financial advisor who carries out financial planning or wealth advice spends a material amount of time learning about a client’s overall financial picture, their goals, investing time horizon and risk tolerance, and they provide advice to create a plan to achieve those financial goals. If their financial planning advice includes helping a client select investments, they usually use portfolios created by asset managers, like Green Alpha.

Green Alpha will open accounts directly with individual investors if it deems the requested portfolio to be suitable for that potential client. However, we will always remind individuals that they should consult with their financial advisor to fully understand how a given Green Alpha portfolio might fit into an overall portfolio allocation strategy. While we are happy to answer your questions and help you understand how we manage our investment portfolios, we do not carry out comprehensive financial planning services and we do not provide advice on portfolios that are not managed by Green Alpha. Therefore, we are not equipped to help individuals create a holistic strategy to meet their financial goals.

As always, if these distinctions are confusing, we invite you to contact us with questions. Our goal is to clarify, not confuse, and sometimes that can most easily be done with a two-way conversation.