Magazine Issues » July-August 2017

FUND LAUNCHES: Machine funding

Digital_brainSome of the most recent product launches have included the “first” european social bond fund and an artificial intelligence fund.

Columbia Threadneedle investments has brought a “social bond” fund to market – apparently the first of its kind in Europe.

The Threadneedle (Lux) European Social Bond product was launched in partnership with Inco, a global consortium for a “new, inclusive and sustainable economy”, and invests in corporate bonds.

It follows on from the firm’s 2013 launch of the UK Social Bond fund in partnership with Big Issue Invest and a US Social Bond fund in 2015.

Both of these funds aim for a financial and a social return through investment in corporate bonds across Europe with a “clear focus on supporting positive outcomes for individuals, communities or society as a whole”.

Simon Bond, director of responsible investment portfolio management, is the fund’s manager. He said: “We are seeing a growing demand from clients to deploy their savings in a way that can generate social benefits and sustainable positive outcomes.”

Investors need not sacrifice performance to achieve social impact, he added.

“By actively selecting specific bonds with positive social outcomes, rather than excluding bonds through conventional negative screens, we aim to generate positive social and financial results.”

Out of 4,000 European corporate bonds in the market, the firm’s credit analysts have identified about 45% that are social in nature across different sectors and countries.

The portfolio, which covers areas such as affordable housing, health, education and employment, offers daily liquidity.

Sector-neutral US equities
In another recent launch, Columbia Threadneedle expanded its US equities range and launched the Threadneedle US Disciplined Core Equities Fund in the firm’s Luxembourg Sicav.

Managed by Brian Condon and Peter Albanese in Boston, the fund provides exposure to US large-cap companies through a quantitative approach with some fundamental analysis.

It targets outperformance of 150 basis points against the S&P 500 Index over a period of three to five years, with a target tracking error of 2%-4%.

The fund is a long-only product and aims to hold around 80 stocks without weighting towards particular sectors.

The management team of ten is led by Condon, who is head of quantitative strategies, and currently manages more than $18 billion (€16 billion) in assets, including more than $15 billion in a similar US mutual fund strategy.

Positive impact private equity
Morgan Stanley Investment Management has raised more than $125 million (€111 million) in final commitments for its first global impact fund.

The PMF Integro I fund, as it is known, will invest in private equity funds that have a positive environmental or social impact.

Launched in partnership with the Morgan Stanley Institute for Sustainable Investing, the fund will be managed by AIP Private Markets, Morgan Stanley’s private markets solutions arm.

James Gorman, Morgan Stanley’s chairman and CEO, said: “From education and healthcare in South Asia to financial inclusion in South America, the fund epitomises our belief as a firm that there are opportunities for investors of all types to pursue both positive financial return and sustainable impact.”

‘Compelling’ Asian bond values
Mirae Asset, the Asian emerging markets specialist, announced a bond fund launch saying that the increasing number of companies looking for finance would make the regional market deeper.

Mirae Asset Global Investments (Hong Kong) has launched the Mirae Asset Asia Bond Fund under the Ucits banner.

The firm said bond valuations in Asia were compelling compared to developed markets and that better credit quality gave investors more diversification opportunities.

Benchmarked against the JP Morgan Asia Credit Index, the fund mainly invests in short to medium-duration investment grade credit, but will also buy government, supranational and high-yield names.

Jin Ha Kim, head of global fixed income at Mirae Asset Global Investments Co, will managed the fund, supported by professionals in five countries including Korea, Hong Kong and India.

Jin Ha Kim said: “We see significant opportunities for growth in Asian bonds due to a favorable macroeconomic outlook, as well as attractive yields, improving financial discipline of credit issuers and lower volatility compared to bonds of other emerging markets.”

Artificial intelligence
Former Pictet fund managers are managing a Smith & Williamson artificial intelligence (AI) fund that itself uses artificial intelligence.

Chris Ford and Tim Day are investing in between 30-35 companies out of a global selection which they believe are best-placed to harness AI “transformational opportunities”.

Before the launch, the firm said the fund would itself use and benefit from AI. It would be embedded within the investment process to enhance the efficiency with which the fund’s managers can identify investable companies. Managed from London, the fund is unconstrained by a benchmark and is meant to hold around half of its positions outside the US.

It is the first fund that Ford and Day have launched since they joined Smith & Williamson. They previously co-led Pictet Asset Management’s global equities business in London.

Rate protection from an ETF
Interest rate normalisation has been exploited by BlackRock, which has launched a floating rate ETF bond fund designed to protect investor portfolios against increasing interest rates.

The iShares $ Floating Rate Bond Ucits ETF provides exposure to US dollar-denominated floating rate bonds, which offer coupons that adjust to reflect changes in interest rates.

The bonds held in the BlackRock fund’s underlying index are rated investment grade or higher and have a maturity of five years or less.

BlackRock said this enabled investors to reduce duration and protect portfolios against periods of rising interest rates. Concerns about rising rates have prompted many investors to consider moving out of longer-duration bonds, BlackRock added.

The fund is physically replicating and it has a total expense ratio of 0.10%.

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