Performance review of FIONA portfolios: Q1 2023

9 minute read

We have used our Fixed Income Optimisation for Net zero Alignment (FIONA) framework to analyse the climate impact of the LQD portfolio and create two parallel portfolios with improved climate impact.

This note analyses the relative performance of FIONA portfolios during Q1 and leads to the following observations for environmentally minded fixed income investors.

Firstly, despite a volatile market, correlation between returns of the portfolios was very high with immaterial impact on performance. Tracking errors for these climate-aligned portfolios continues to be low.

Given the significantly reduced carbon footprint of FIONA portfolios, we encourage investors to consider these strategies as a free option to protect against climate-related asset-price volatility in the future.

Secondly, the sector-free Case 2 FIONA portfolio underperformed slightly. This was driven by poor Q1 performance of ‘low-carbon’ sectors such as healthcare combined with strong performance in the financial sector. Lastly, the sector-fixed Case 1 FIONA portfolio outperformed even more slightly. This was driven by intra-sector relative outperformance of stronger climate names in consumer staples, financials and industrials.

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