Case Studies in Focus: Turning a Legacy 80/20 Portfolio into a Twin-Purpose, Passive ESG Engine

Tatyana Mursalimov
Jul 28
3 min read

Updated: Aug 13

This post marks the first in a new series exploring real-life case studies from our work with charities across the UK. Each post highlights how tailored investment consultancy can unlock growth, manage risk, and strengthen alignment with mission and values.

This case follows a prestigious UK learned-society charity managing a £20 million portfolio and facing a familiar challenge: how to modernise a legacy 80/20 investment approach in a way that improves efficiency, strengthens alignment with mission, and responds to trustee concerns around ESG - all without adding governance burden.

From One Blended Pot to a Clearer Structure

For years, the charity had treated its investments as a single portfolio: 80% equities, 20% bonds. The blend was a pragmatic simplification – combining a proxy for a 100% equity strategy for the long-term endowment and a more balanced reserves pool. But a routine policy review revealed four underlying issues:

The long-term growth prospects of the endowment were being muted.
Liquidity risk was unaddressed, with all bonds held in long-duration assets.
The portfolio retained a UK income bias, despite limited need for dividends.
Responsible investment was being sidelined, based on a false trade-off: “passive means no ESG.”

The trustees asked whether a more structured approach could better serve both present needs and future goals - without increasing the governance burden.

A Twin-Purpose Design

Working closely with the board, PMCL began by clarifying the charity’s underlying objectives and cashflows. A mapping exercise confirmed that most endowments distributed well below income levels, while reserves could reasonably draw on capital. This allowed a shift to a total-return mindset - removing the need for UK dividend bias.

We restructured the portfolio into two distinct parts:

Growth Pool: Designed for the long-term endowments, this pool moved to global passive equities, with a sleeve of bonds and gilts for diversification and inflation linkage.
Liquidity Pool: Aligned with short-term spending needs, this pool was anchored in short-dated gilts and high-quality sterling credit - assets that can be realised within days.

The charity also wanted to reflect its growing concerns about climate and sustainability - but didn’t want to compromise its preference for passive management. A trustee and member survey showed over 90% viewed ESG risk as “very important.” We helped demonstrate how ESG-screened and climate-tilted indices could meet their ethical aims at index-level cost.

Platform Due Diligence and Governance Enhancements

We carried out a comprehensive review of passive platforms, assessing tracking accuracy, breadth of ESG index ranges, voting policies, and service quality. Importantly, we examined portfolio-level diversification to avoid hidden risks - such as over-concentration in mega-cap names that often affect ESG passive funds.

The selected platform met the charity’s stewardship standards, while keeping total fees below 0.20% p.a.

We then updated the investment policy documents to reflect the new structure - introducing two benchmarks, two risk budgets, and a simple governance table linking liquidity pool size to forecast cash needs. Quarterly reporting now clearly separates the growth and liquidity pools, helping trustees focus meetings on mission delivery rather than mechanics.

Tangible Outcomes

The results speak for themselves:

Improved growth prospects: The dedicated global-equity endowment pool is forecast to grow significantly faster than the previous blended model, supporting future scholars and programmes.
Liquidity assured: A ladder of short-dated reserves assets now meets spending calls within three days, avoiding forced sales in downturns.
ESG aligned: The use of climate-tilted and screened indices has enabled ethical alignment without sacrificing cost efficiency.
Clearer oversight: Two mandates, transparent benchmarks, and governance-friendly reporting give the board confidence with minimal administrative complexity.

How We Can Help

This case illustrates the value of breaking legacy models to build structures that better reflect a charity’s needs - using passive tools without compromising on purpose or performance.

At PMCL, we help charities align their portfolios with their missions while maintaining cost-efficiency, good governance, and a focus on the long term. As one client put it: “PMCL has been an invaluable support in the development and implementation of an investment strategy that meets our organisational objectives. PMCL provides objective and accessible insight, analysis and expertise to help us navigate big and complex decisions with appropriate assurance.”

If your organisation is reviewing its approach or facing similar structural questions, we’d be happy to explore how we can support you.

Stay tuned for the next post in our Case Studies series, where we’ll explore how we helped to design a sustainable spending policy for a permanently-endowed local foundation.