The latest in funds and investments in North America.

UBS
UBS Asset Management, part of UBS, has created a new exchange traded fund that taps sustainable investment ideas via bonds issued by international development banks.
The new entity is called UBS ETF – Sustainable Development Bank Bonds UCITS ETF.

“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”, Andrew Walsh, head of passive and ETF specialist sales UK at the Swiss firm, said.

“Investors also benefit from high liquidity of the securities and excellent creditworthiness of the supranational issuers. In recent years, these bonds have provided higher yields than US government bonds, this relative yield performance could vary going forward due to the fact that even bonds of development banks are exposed to interest rate risk,” he said. 

International and multilateral development banks, such as the World Bank or the European Bank for Reconstruction and Development, are responsible for providing financing for the social and economic progress of developing countries. 

The new ETF replicates a UBS index. To give its full name, it is called the Solactive UBS Global Multilateral Development Bank Bond USD 25% Issuer Capped TR Index. The index includes bonds issued in dollars by international development banks with minimum rating of AA- (S&P) or Aa3 (Moody’s). To be included in the index, a security must have a minimum issue amount of $500 million and a residual maturity of at least 12 months. The index is weighted based on market capitalisation, but the weight of each individual issuer cannot exceed 25 per cent.

Octopus Investments
Octopus Investments, part of the UK’s Octopus Group, plans to roll out an income fund that plugs into the manager’s stock-picking expertise, with an aim to beat market returns via US equities.

The FP Octopus UK Multi Cap Income Fund will invest across the market cap spectrum. The fund will blend earnings and dividend growth from a mix of businesses from the FTSE 100, through to mid- and small-cap equities without relying on the limited number of traditional go-to dividend paying stocks. It targets a yield of 4 per cent. The offer period for the new fund will open on 26 November with a limited availability share class that has a discounted annual management charge of 0.30 per cent, giving an ongoing charges figure of just 0.45 per cent. The new fund will be officially launched on 10 December.

“The case for equity income is well understood, offering investors scope for sustainable and growing dividends, with the potential for capital growth. However, just 10 stocks represent 54 per cent of forecast FTSE 100 dividend payments for 2018,” Octopus said. It added that “almost three quarters of traditional income funds hold these [top-10] stocks, there is significant concentration within the income sector.

Taking a multi-cap approach, this new Fund will offer investors asset diversification across the portfolio”.

The fund will be managed by the quoted companies team led by Richard Power. Power has more than 20 years’ experience of smaller companies investing and the team collectively manages over £1.7 billion ($2.2 billion) of assets in companies ranging in market cap from £10 million to over £3 billion. Chris McVey, will be responsible for the day-to-day management of the fund, leaning on two decades of experience in small and mid-caps.

The fund sits alongside the FP Octopus UK Micro Cap Growth Fund, managed by the same team and follows a similar bottom-up investment approach.