Last month, Goldman Sachs Group, Inc. made the news with the launch of a digital investment management platform called The Marcus Invest Account. With this launch, Goldman became the latest firm to offer a robo-advisor investing platform for individuals with as little as $1,000 to invest. Goldman’s Marcus Invest platform touts its offering of three low-cost portfolio strategies (e.g. Goldman Sachs Core, Goldman Sachs Impact and Goldman Sachs Smart Beta).
Goldman’s Marcus Invest, designed to satisfy a growing interest on the part of retail investors to invest in line with their values and achieve positive societal outcome consistent with their financial goals, could produce for the conservative investor a less than impactful portfolio at a high cost than they may have expected.
- Sustainable Investing: Investors can end up with portfolios that are dominated by ETFs that don’t qualify as sustainable investment vehicles. For example, the Goldman Sachs Impact portfolio strategy states it is designed for “people who want to support sustainable business practices and avoid environmental and social harm while tracking market benchmarks.” It is also noted that coal, tobacco and firearms are excluded. The actual portfolios consist of conventional funds that don’t employ a sustainable investing approach. In total, the platform relies on 10 ETFs, including ETFs offered by BlackRock, State Street Global Advisors and Vanguard. Portfolio allocations will vary based on risk tolerance and investment time horizon, however, investors with 40% stock and 60% bond allocations, can end up with portfolios that are dominated by ETFs that don’t qualify as sustainable investment vehicles. As referenced in Table 1, four of the ten preselected ETF investment options pursue a sustainable investing approach while six do not.
Table 1: ETFs offered on Goldman’s Marcus Invest Platform-Impact Portfolio Strategy
|ETF Fund||Expense Ratio (%)||Sustainable Investing Approach|
|iShares ESG Aware MSCI USA ETF (ESGU)||0.15||ESG Integration-Mixed|
|iShares ESG Aware MSCI EAFE ETF (ESGD)||0.20||ESG Integration-Mixed|
|iShares ESG Aware MSCI USA Small-Cap ETF (ESML)||0.17||ESG Integration-Mixed|
|iShares ESG Aware MSCI Emerging Markets ETF (ESGE)||0.25||ESG Integration-Mixed|
|Vanguard Real Estate Index Fund ETF (VNQ)||0.12||Not explicitly adopted|
|Vanguard Global ex- US Real Estate Index Fund ETF (VNQI)||0.12||Not explicitly adopted|
|iShares 1-3 Year Treasury Bond ETF (SHY)||0.15||Not explicitly adopted|
|SPDR Short Term Muni Bond ETF (SHM)||0.20||Not explicitly adopted|
|iShares National Muni Bond ETF (MUB)||0.07||Not explicitly adopted|
|SPDR Barclays High Yield ETF (JNK)||0.40||Not explicitly adopted|
|Cash||NA||Cash investment option not specified|
- Low-Cost Expenses: The Marcus Invest site notes that ETF expenses range from 0.11% to 0.19% when in fact the expense ratios levied by these 10 funds range from a low of 7 bps to a high of 40 bps and the average arithmetic expense ratio is 0.183%. Overall average market weighted ETF expenses will vary depending on each investor’s risk tolerance and investment time horizon. In addition to ETF expenses borne by investors, Goldman’s Marcus charges a portfolio fee of 0.35%.
Sustainable Research & Analysis LLC provides a timely monthly snapshot of trends and developments affecting the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets, fund flows, fund re-brandings, new fund firms, new fund launches and fund closures. CLICK HERE to request additional information.
Note of Explanation: While definitions continue to evolve, sustainable investing refers to a range of five overarching investing approaches or strategies that encompass: values-based investing, negative screening (exclusions), thematic investing, impact investing and ESG integration, in turn classified into ESG Integration, ESG Integration-Consideration and ESG Integration-Mixed, referring to a core strategy consisting of ESG integration, but exclusions, impact or thematic approaches may also be employed. Shareholder/bondholder engagement and proxy voting may also be employed along with one of more of these strategies that are not mutually exclusive. Prepared by: Sustainable Research and Analysis LLC