Three Insights That Led to Ellevest Intentional Impact Portfolios

By Sallie Krawcheck

Over the past few years, I’ve had three big a-ha insights — yes, even after all of these years in business — that have changed the way I’ve seen things:

Insight #1: If we can get more money in the hands of women, we not only transform their lives, we can also transform societies.

Money is women’s #1 source of stress, and the act of investing and saving is our #1 driver of our confidence in achieving future financial goals. And who of us doesn’t intuitively know that we wouldn’t be in this #MeToo / #TimesUp moment (a moment so transformative that it’s now two years old) if women had as much money as men do?

This recognition — and that women don’t invest as much as men do — led to the founding of Ellevest.

Insight #2: Inclusivity is a choice the investing industry keeps refusing to make.

A couple of years ago, a very successful woman told me: “I’m tired of supporting the companies and institutions that have not supported me. I no longer want to have my money managed at a firm at which I wouldn’t let my daughter work.”

These comments led to our starting a Private Wealth business at Ellevest, based on demand from successful women who want to be part of changing the investing industry and who want to be part of an investing company that is inclusive, not exclusive.

(And think the investing industry is making progress since then? Just last week Ken Fisher, founder of the $112 billion-asset Fisher Investments, made a series of crude and, frankly, misogynistic and disturbing comments at an industry conference.)

Insight #3: Everything we do with our money has an impact, even if we don’t know what that impact is.

Unintentional impact can happen when you donate your money to a cause you believe in, like providing clean water in developing countries — but meanwhile, you’re investing in companies that are polluting that same water. It can mean choosing to direct your investments away from gun manufacturers, while leaving your deposits at a bank that lends to gun manufacturers.

This insight led to our launch this week of Ellevest Intentional Impact Portfolios, the first of its kind. You can read more about it here, and I hope you will; but at its core we can help you invest your money in companies that meet our criteria for doing the right things by women — and redirect your money away from companies with products, policies, and practices that may harm them (as you might expect from Ellevest).

But this goes beyond the good work that is being done on investing in companies with more women in senior roles; it further recognizes that the issues that negatively impact us or our planet tend to impact women more; and that when women thrive, everyone thrives.

So, investing intentionally in women at Ellevest also means our dollars can support issues like improving the environment, safer products, improved human rights, better working conditions, less fraud.

That’s us: working to build Ellevest intentionally, based on these key insights. This includes doing what we can to help women invest more, from investing her first dollar through to private wealth. It includes building the company at which we would want our daughters — and our sons — to work. It means breaking from investing industry practices that are bad for clients and employees (like forcing employees to sign confidential arbitration agreements covering sexual harassment, or accepting payments from asset managers to be on our platform, or operating at less than a fiduciary standard).

We don’t do any of that.

Now, we also help you invest your money intentionally. That starts with investing your money in a way that works to get you to your goals. And we can invest your money in a way that aligns with what’s important to you, too.

This is going to be big.

Sallie Krawcheck Signature

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Ellevest Intentional Impact Portfolios are separately managed equity accounts that are sub-advised by Ethic, Inc., an SEC-registered investment advisor. As sub-advisor, Ethic constructs and manages portfolios of individual stock positions benchmarked to an underlying index and customized to specific values criteria. The sub-advisor seeks to deliver equity market returns that track closely with a designated equity benchmark (domestic and / or international) while outperforming on impact across key sustainability criteria as defined by Ellevest and / or the client.

Ellevest Intentional Impact Portfolios are expected to comprise around 300 US-listed equities (including ADRs as applicable) chosen through an outsourced multi-factor optimization software and sustainability data science developed by Ethic to minimize tracking error.

The sustainability criteria is based on risks in the following categories: Ethics and Fraud, Greenhouse Gas Emissions, Exploitative Products, Product Quality and Safety, Working Conditions, Labor Relations, Workplace Diversity, Waste, Water, Human Rights and Community, War, Firearms, Low Employee Representation (gender), Low Management Representation (gender), Low Board Representation (gender).

The primary benefit of Ellevest Intentional Impact Portfolio is that it provides broad market exposure with a goal of keeping average tracking error low over the long term, less than 1.50%, while divesting from companies that do not meet the strategy’s sustainability parameters. The tracking error may be meaningfully higher if the equity allocation is transitioned over time due to tax or other considerations.

Some of the key risks for the investing in Ellevest Intentional Impact Portfolio include:

Market Risk

As with all publicly traded securities, the SMA is exposed to market risk, the risk of losses arising from fluctuations in market prices caused by factors independent of a security’s particular underlying circumstances.

Active Risk

Although the SMA is constructed to minimize tracking error relative to its benchmark, there is no assurance that the strategy will generate market returns within the estimated tracking error. Because the SMA is designed to capture investment returns associated with gender diversity, and high environmental and governance standards, the SMA may exclude, overweight, or underweight individual companies and/or sectors of the market. As a result, the SMA will not fully participate in the market returns of a general investment strategy. The SMA may over or under perform a general market strategy.

Sub-Advisor Risk

The success of an account’s investment through sub-advisors is subject to a variety of risks, including those related to the quality of the management of the sub-advisor and the ability of such management to develop and maintain a successful business enterprise, and the ability of the sub-advisor to successfully execute, operate, and manage the intended strategy at or below the target tracking error.

Business Risk

The fund’s strategy relies on key personnel, their expertise, relationships and networks. A loss of one or more key personnel may adversely impact the strategy.

Ellevest Intentional Impact Portfolios give clients access to broad equity market exposure. The target tracking error for the Portfolios is under 1.50%. Reporting on Ellevest Intentional Impact Portfolios will be provided to clients no less than annually.

The minimum investment in Ellevest Intentional Impact Portfolio is $250,000. In addition to Ellevest’s advisory fee, the client will pay 0.25% of assets managed to the sub-advisor.

All opinions and views expressed by Ellevest are current as of the date of this writing, for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

Sallie Krawcheck

Sallie Krawcheck is the Founder & CEO of Ellevest.