We profile some of the most interesting fund launches of recent weeks, which include two new green bond funds.
CLIMATE BONDS
Lombard Odier Investment Managers has launched its LO Funds-Global Climate Bond Fund in partnership with Affirmative Investment Management, a fixed income manager specialising in impact strategies.
Climate bonds are debt issued by governments, supranational entities, municipalities and corporations to finance activities designed to help the world mitigate or adapt to climate change and its effects.
A more common name for these debt instruments is green bonds, a market that has grown 159% year-on-year since 2013, according to Lombard.
The fund uses a diversified investment grade portfolio, which seeks to invest in organisations working for a low-carbon and climate-resilient economy, while targeting a higher yield than a typical investment grade portfolio.
Lombard said this type of product is increasingly attractive to investors who want to make a positive impact on the environment but not lose returns.
Lombard had 223 billion Swiss francs (€209 billion) under management, as of the end of June last year.
GREEN BONDS
BlackRock has launched the Green Bond Index Fund in a move that reflects the firm’s ambitions in social and environmental investment.
BlackRock says there is growing demand for this “fast-growing” part of the fixed income market.
The Green Bond Index Fund will offer investors exposure to a selection of fixed income securities that are issued to fund projects with direct environmental benefits.
The fund will reflect performance of the Bloomberg Barclays MSCI Global Green Bond Index.
Ashley Schulten, director, head of climate solutions (fixed income) and co-manager of the fund, said: “We see a strong interest in green bonds from clients we service as they seek to participate in climate-friendly and environmentally beneficial investments without making major changes to sector allocation or liquidity risk in their holdings.”
His colleague Darren Wills is co-manager.
In February 2015, BlackRock launched BlackRock Impact, the firm’s global platform catering to investors with social or environmental objectives.
SUSTAINABLE EQUITIES
JP Morgan Asset Management (JPMAM) announced the launch of the JPMorgan Funds – Europe Sustainable Equity Fund, a ‘best-in-class’ Ucits fund based in Luxembourg.
The fund is benchmarked to the MSCI Europe Index and managed by portfolio managers Richard Webb, Joanna Crompton and William Johnson.
The fund aims to invest in high-quality European companies whose governance fosters a long-term sustainability view and which are attractively priced.
Companies will be evaluated by their performance on material ESG issues, said the firm. Some companies will already display high sustainability and other companies will be engaged with.
“Companies with effective governance and superior management of environmental and social issues tend to have better profitability, operating performance, and lower costs of capital than those who do not,” said Webb.
ANTI-BENCHMARK
Paris-based Tobam has launched the Anti-Benchmark Global High Yield Strategy, saying it was in response to demand for smarter fixed income solutions.
The strategy aims to apply its ‘anti-benchmark’ approach to the global high yield market, which Tobam said was “plagued by heavy sector concentrations, especially within the commodity space, and prone to powerful swings and liquidity gaps”.
The firm said defaults typically occur by waves and often within a specific sector, so adopting a diversified approach helps mitigate the risk of being overly exposed to default risk.
The strategy has already secured $100 million (€94 million)of capital seeding from a large public pension fund, Tobam said, as well as an initial inflow from a UK-based wealth manager already invested in Tobam’s Anti-Benchmark US Credit strategy.
Raphaël Thuin, head of fixed income, said: “The high yield market is a very favourable area for a diversified approach to investing. The market’s staggering concentration toward commodity names, currently exceeding 20% in market value, is putting the entire asset class at risk.”
LONG-SHORT EQUITY
H2O announced the launch of Fidelio, a long–short equity fund which aims to generate an absolute return of 5% per annum over a three-year investment horizon.
The fund’s objective is to keep volatility below that of global equity markets, the firm said.
It will also seek to exhibit a low correlation to the major global equity market indices taking both long and short positions, mainly on economic sectors and listed companies.
“Against a market backdrop characterised by low interest rates, excessive regulation and mechanised investment strategies, the dispersion of risk premiums across equity markets has reached unprecedented levels, thereby offering many unique arbitrage opportunities for active relative-value managers,” H2O said.
A top-down component was “critical to seize the shifts in paradigm, the swings in market fashions and the correlation rotations that impact the equity asset class as a whole”.
But the fund also relies on a bottom-up process managed by Gonzague Legoff.
According to Legoff and his co-manager, Christophe Chappuis: “Investors’ constraints generate the best sources of performance.
“As most asset management companies organise their equity research and management teams along geographical lines, they breed regional arbitrage opportunities between stocks belonging to the same sectors and exposed to the same markets.”
Since its inception on October 25, 2016, the dollar-denominated institutional share class of the fund has delivered a 3.9% return (at at February 13, 2017).
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