Fidelity International is adding to its sustainable fund range by transitioning its MoneyBuilder Income Fund – a corporate bond fund – to the Fidelity Sustainable MoneyBuilder Income Fund, with effect from May 26.
The fund will adopt a strategy whereby a minimum of 70% of the fund’s net assets will be invested in securities deemed by the managers to have “sustainable characteristics”, defined as MSCI ESG ratings of AAA-BBB, or BB for emerging markets. If the security does not have an MSCI ESG rating, Fidelity will rate it A-C for sustainability.
Sajiv Vaid and Kris Atkinson will remain as co-managers of the fund.
Vaid said ESG considerations were becoming an increasingly important driver of risk and return in corporate bond markets, adding: “Today, 87% of the fund is already invested in issuers deemed to maintain sustainable characteristics, considerably above our Sustainable Fund Family minimum threshold of 70%.
Atkinson said corporate bonds issued by tobacco companies have underperformed the broader credit market over the last few years as investors have demanded a higher premium to own this debt, or even shied away from the sector altogether.
“Given our focus on protecting on the downside, we’ve reflected this in our positioning in the portfolio, gradually taking tobacco down from 5% of the fund in 2014 to zero today. In many respects this evolution represents a formalisation and enhancement to how sustainability is incorporated into the management of the portfolio, and a natural next step in the fund’s long history.”
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