Hermes Investment Management is launching high yield funds focused on social and environmental engagement, together with Federated Investors and UBS.
The trio are launching the SDG Engagement High Yield Credit funds, which will look to achieve a meaningful social and/or environmental impact on top of a strong return by investing in high yield bonds and engaging with their issuers.
The Hermes SDG Engagement High Yield Credit fund is available in the UK from 2 October. The fund will be managed by Hermes' Mitch Reznick, head of research and sustainable fixed income, and Fraser Lundie, head of credit.
Hermes' Aaron Hay will also be lead engager on the fund, dedicated to driving positive change in line with the United Nations Sustainable Development Goals framework. The team will also be supported by 26 members of the wider Hermes fixed income team.
Hermes IM will offer a UCITS fund to investors across the globe. US investors will also be able to access a mutual fund advised by Federated Investment Management Company, sub-advised by Hermes IM and distributed by Federated Securities Corp.
In 2018, Federated Investors acquired a majority interest in London-based Hermes Fund Managers, which operates Hermes Investment Management. The US funds will be available from 26 September and also co-managed by Reznick and Lundie.
Meanwhile, UBS will make the funds available through its wealth platform to both US and non-US clients in October (the latter initially on an exclusive basis for a six-month period).
The new products will form part of UBS's $5bn commitment to SDG-related impact investing, and will also be the first new strategy added to its sustainable multi-asset portfolio since its launch last year.
The new funds aim to support key sustainability initiatives across the financial services industry, including the UN-backed Principles for Responsible Investment (PRI), which has called for fund managers to engage more effectively with bond issuers, and the IFC's Operating Principles for Impact Management, a new set of global impact investing standards.
Paul Uhlman, president of Federated Securities Corp, said: "UBS has a longstanding relationship with Federated Investors and Hermes Investment Management. We are pleased to have their support of these new products and look forward to continuing to collaborate with them on bringing the diverse range of Federated and Hermes strategies to investors through their advisor network around the globe."
Saker Nusseibeh, CEO at Hermes IM, said: "Having consistently advocated for stewardship to be at the core of investing, we have been encouraged to see the recent shift in industry standards.
"Now is the time for fixed income markets to take heed and for all stakeholders to fulfil their potential as sustainable investors. The UN SDGs provide a valuable framework for engaging to create more impactful and successful companies."
Mark Haefele, CIO at UBS Global Wealth Management, added: "Investors must understand companies' sustainability issues on every level as they strive to maximize their returns as well as their support for sustainability goals. Engaging with firms as issuers of debt as well as equity is an important new step on this journey."
This article was first published on Investment Week, sister site to InvestmentEurope