We used LCTD for this illustration because it offers:
- A diversified, developed market equity portfolio
- Sector weights broadly similar to global ex US benchmarks
- A modest tilt towards lower carbon and transition ready companies
The five largest weights are HSBC at 1.9% (Banks), AML at 1.7% (Semiconductors), AstraZeneca at 1.7% (Pharma), Iberdrola at 1.4% (Utilities) and Allianz at 1.3% (Insurance). All issuer-level references that follow use these real names and weights, drawn directly from the public holdings file.
Industry Breakdown and Vulnerability
Each security is mapped to one of 12 Fed industries (e.g., machinery, computers, depository institutions). For each industry we compute:
- Portfolio weight (%)
- Estimated GPR beta (sensitivity to the GPR factor)
- Impact score for the June 23 spike, translated into basis points of expected effect on the portfolio’s return for that event
Based on the sign of the impact score and economic reasoning, industries are classified as:
- Vulnerable (expected to be hurt by the shock), or
- Resilient (expected to benefit or provide ballast).
For the June 23 spike and the LCTD portfolio, the overlay estimates:
- Total negative impact: ≈ 33.8 bps
- Total positive impact: ≈ +15.3 bps
- Net GPR impact: ≈ 18.4 bps
In other words, conditional on a shock of this severity, the portfolio is tilted modestly toward GPR-sensitive industries, with an expected drag of roughly 18 basis points compared with a GPR-neutral configuration.
The vulnerability composition is summarized as:
- 39% of portfolio weight in vulnerable industries
- 61% in non-vulnerable or resilient industries
- five of 12 industries classified as vulnerable by the model
Exhibit 3: Industry-Level GPR Impact for the June 23, 2025, Spike