PGIM has added a new product to its suite of fixed income ESG mandates with the launch of its Strategic Income ESG fund.
Classed as Article 8 under SFDR guidelines, the fund will adopt a flexible approach to portfolio construction, investing across investment grade fixed income, high-yield credit, emerging market debt, government bonds, asset-backed securities and commercial mortgage-backed securities. At time of launch, however, it has a marked underweight to US Treasuries and agency mortgage-backed securities.
PGIM Strategic Income ESG - which is co-managed by PGIM Fixed Income's Michael Collins, Gregory Peters, Richard Piccirillo, Lindsay Rosner and Robert Tipp - is PGIM's seventh UCITS strategy with an ESG mandate, having respositioned four of its existing products to incorporate ESG principles earlier this month. It adopts an ESG impact ratings framework assigned by PGIM Fixed income's team of 110 analysts and five-strong ESG research team. This is overseen by PGIM Fixed income's ESG committee.
Kimberly LaPointe (pictured), head of PGIM Investments International, said: "While the strategic income marketplace is highly competitive, our team has proven its ability to generate strong risk-adjusted returns over the long term.
"Building on this compelling track record, the new UCITS portfolio will tilt towards issuers with higher ESG ratings, therefore meeting the growing demand from sustainability-minded investors."
Co-manager Peters added that, as the global post-pandemic recovery continues with "unfamiliar obstacles", the new fund will be able to "capitalise on changing market opportunities, while still mitigating downside risks".
"While spreads in many credit sectors have tightened considerably over the past 18 months, the combination of high cash balances and low rates are likely to continue pushing investors further out along the risk spectrum in a search for yield," he said. "However, narrower spreads leave little room for error, and the uncertain course of the long-term economic recovery warrants a discerning approach to credit selection."