UBS launches impact-style bond ETF with above-Treasury yield

UBS_branchUBS Asset Management has launched an exchange-traded fund (ETF) investing in the bonds of international development banks, such as the World Bank.

The UBS ETF – Sustainable Development Bank Bonds Ucits ETF could be suitable as an ‘impact’ investment , the firm suggested, as development banks finance loans at very low rates in developing countries with a view to reducing poverty and supporting local infrastructure and growth.

Bonds in the index combine yields of 10-30 basis points above the US Treasury yield and the ETF replicates the Solactive UBS Global Multilateral Development Bank Bond USD 25% Issuer Capped TR Index.

The index includes bonds issued in US dollars by international development banks. To be included in the index, a security must have a minimum issue amount of $500 million and a residual maturity of at least twelve months.  It is weighted based on market capitalisation, but the weight of each individual issuer cannot exceed 25%.

“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”, said Andrew Walsh, head of passive and ETF specialist sales UK.

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