UBS Asset Management has launched the UBS ETF – Sustainable Development Bank Bonds Ucits ETF, in response to strong continued growth in assets managed according to SRI principles in markets such as Germany, Austria and Switzerland – which the manager says has risen to €2.7trn from €875bn in the 2014-17 period.
The ETF replicates the Solactive UBS Global Multilateral Development Bank Bond USD 25% Issuer Capped index.
This index includes bonds issued in dollars by international development banks with minimum rating of AA- (S&P) or Aa3 (Moody’s). To be included in the index, a security must have a minimum issue amount of $500m and a residual maturity of at least 12 months. The index is market cap weighted, but an individual issuer cannot weigh more than 25%. As of June 2018, the index had a yield-to-maturity of 2.77% and an average duration of 3.2 years.
Andrew Walsh, head of Passive & ETF Specialist Sales UK, UBS, said: “These bonds are very interesting for a number of reasons. As in impact investing, by investing in these bonds, one can provide relatively direct support to a series of projects that generate positive effects for society in general. Investors also benefit from high liquidity of the securities and excellent creditworthiness of the supranational issuers. In recent years, these bonds have provided higher yields than US government bonds, this relative yield performance could vary going forward due to the fact that even bonds of development banks are exposed to interest rate risk.”
Institutions such as the World Bank or the European Bank for Reconstruction and Development, are responsible for providing financing that is focused on social and economic progress, which in turn implies infrastructure development or projects intended to protect the environment are particularly important, the UBS AM added.