06 August 2019
According to UBS Global Wealth Management, private investors are increasingly looking to invest their entire portfolio sustainably.
This led the firm to develop a '100% sustainable strategic asset allocation,' covering various asset classes, which can be implemented via the UBS Sustainable Investing (SI) Fund.
The fund claims to provide investors with 100% exposure to sustainable investments (excluding cash), with expected volatility-adjusted returns comparable to traditional portfolios. It was designed with input from some of the world leaders in sustainable investing, including the World Bank and Hermes.
Launched in January 2018, with $1.2 billion of seed capital, the sustainable portfolio has now reached $6.2 billion of assets, having outperformed conventional peers since its inception. It includes development bank bonds and green bonds, as well as equities of companies rated as leaders or improvers in terms of their environmental, social and governance (ESG) performance.
The key to its success is in combining investing strategies that complement each other. For example, high-grade bonds, issued by multilateral development banks exhibit similar risk/return characteristics as government bonds, but their proceeds directly advance impactful projects. Similarly, UBS's ESG Engagement Equities "have value bias and are well positioned to substitute small- and mid-cap equity allocation of traditional portfolios," the company says.
"The UBS SI Fund has been chosen by a wide range of investors, from retail clients in Switzerland, to high net-worth individuals, foundations, and institutional investors," says James Purcell, UBS Global Wealth Management chief investment officer and head of sustainable and impact investing.
"Investors in the UBS SI Fund typically want to generate returns comparable to a traditional strategic asset allocation while knowing that their capital is being used to benefit people and the planet."
In addition, he notes: "We see great potential in bondholder engagement strategies - these are currently under-utilised by sustainable investors."