From Portfolio Construction to Manager Research: Isio and Direct

Isio is a modern advisory firm with four key areas of focus: pensions, investments, employee benefits, and wealth management. Focusing on the UK market, they have over £300 billion in AUMA, advise one in three FTSE 100 firms, and circa £2 billion in AUM across private capital clients.

For Portfolio Manager Daniel Nilsson, Isio’s diverse offering means no two days are the same.

“I have dual responsibilities,” Nilsson says. “As part of the equity manager research team, we’re responsible for manager and selection across private and public equities. Our client base is incredibly diverse, from private capital clients like endowments, foundations, and non-profits to Local Government Pension Schemes and defined contribution schemes.

I also sit within our portfolio management team, where we've launched our own discretionary managed portfolio service proposition this year, and these portfolios are available across the most well-known platforms in the UK, from Aberdeen to Aviva.

We have seven multi-asset portfolios ranging from cautious to adventurous, so I focus on setting the asset allocation and conducting manager research and selection across global small caps, emerging markets, global developed alternatives, and more.”

To balance all these priorities, Nilsson and team turned to Morningstar Direct.  

"I use almost every available tool in Direct,” Nilsson says. “Our entire team use it daily, for a variety of functions.

I use it as part of my screening process for manager research. Recently, we analysed emerging market funds for a large client with a big mandate. We explored category averages, exported the Global Emerging Markets peer group, and applied our quantitative screening criteria to the fund universe, assessing metrics like fees, performance history, and AUM.

Once we’ve quantitatively identified funds, we enrich our analysis with qualitative insights.  We use the Morningstar Style Box and Factor Profile in Direct to understand the fund better, from its risk profile to the managers, and whether the fund is small, mid, or large-cap. We want to make sure the managers are playing their part as we construct and blend portfolios.

Another useful tool is the style drift analysis, where you can see how strategies have changed over time. Whether they move up or down the market cap spectrum, or evolve across investment style, so value, blend, or growth. It all comes together to inform our understanding of a fund.”

“The Portfolio Manager Handbook in Direct is another tool we use,” Nilsson says.

“As part of our manager due diligence, we can get a holistic view of a manager’s career and track record across any strategy they’ve run in the database. It’s helpful when we have portfolio managers launch a boutique or join another firm. We can go into Direct and get their history.”

“We use Direct’s Portfolio Management tool daily,” Nilsson says. “When we’re creating our clients’ equity allocations, we create identical portfolios to provide style analysis, blend, and portfolio aggregation.

When they ask about their exposures, we can walk them through their geographic, sector, and even stock-level exposures. All our clients, but especially our LGPS and DC clients, find this invaluable.”

"Of all the capabilities of Direct, I find Presentation Studio the most valuable,” Nilsson says.

“I’ve used it for over a decade, and now that we have our own MPS offering, we can analyse the performance of our distinct peers, who we’ve identified as most similar to us in approach and asset allocation.

I’ve already built out all the templates in Presentation Studio, so we can adjust and recalculate instantly, like the one, three, and five-year performance of our peer groups versus our portfolios.  

What I love about Presentation Studio is that you can generate any time period you want. It’s incredibly customisable, and that level of functionality and flexibility keeps us using Direct.”

Great products are always innovating, and great users are always learning.

“I’ve recently downloaded the Morningstar API with the Excel add-in,” Nilsson says. “I’m learning to use it, and so far, loving the experience.

Using SEC IDs in portfolios, I can generate all the returns, going back through the portfolio’s history, all at the click of a button. I then download all the portfolio holdings straight to Excel for further analysis, like calculations, formatting, or charting—it’s very convenient.

A few months ago, I moved to the new browser-based Direct experience, and it’s been a really smooth transition. It still has all the functionality I expect from Direct, but it’s very user-friendly. That’s useful for my team, who are using Direct more and more. I’m looking forward to seeing how Direct will continue to evolve.”

Daniel Nilsson has not received any cash or non-cash compensation from Morningstar, directly or indirectly, in exchange for this client success story.