Comparisons of Asset Manager, Asset Owner, and Wealth and Retail Portfolios

Abstract

We find more similarities than differences in examining 800 European asset manager, asset owner, and wealth/retail portfolios. The total risk of the average European institutional portfolio across these types is 10 to 11% and is dominated by equity risk, which accounts for 90% of total portfolio risk. Within the institutions’ equity portfolios, country-specific tilts account for approximately half of the risk, and then 35% and 17% of the risk is attributable to style factors and sectors, respectively. The dominating style factor is small size, and relative to the MSCI ACWI equity benchmark, the average institution has negative quality and momentum tilts, and a positive value bias. All three types of institutional investors have lower carbon emission intensities, but lower ESG scores, than MSCI ACWI.

Keywords: Portfolio allocation, institutional investors, risk decomposition, style factor tilts, sector exposure, ESG, carbon emissions

JEL Classification: G11, G12, G20, G21, G22, G23, Q35