Helping Asian Wealth Management Communities interact

Investments

BlackRock and UBS to launch new bond ETF

UBS and BlackRock have been announced to have formed a partnership to launch a new ETF, with a focus on investing in bonds from multilateral development banks.

The newly-launched ETF is included in certain mandates of UBS Global Wealth Management, according to an article by Cash.Online. The ETF is also said to be offered on UBS Global Wealth Management platforms, serving as an alternative to traditional investments in high-quality bonds, such as government bonds.

Multilateral Development Bank bonds, due to the fact that such entities are created by a group of countries, are appealing investments as they tend to offer investors generally high credit ratings and comparable returns as sovereign bonds. The funds raised by Multilateral Development Bank bonds tend to contribute to Sustainable Development Goals.

The iShares USD Development Bank Bonds UCITS ETF tracks the FTSE World Broad Investment-Grade USD MDB Bond Capped Index, which is a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets.

The new ETF currently is reported to have over USD120 million AUM, including a start-up contribution from UBS. UBS itself currently possess over USD1 billion AUM in promotional bank bonds, according to the Cash.Online article.

The FTSE World Broad Investment-Grade USD MDB Bond Capped Index offers exposure to sovereign debt from over 20 countries, denominated in a variety of currencies, as well as US dollar-denominated securities from the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the International Development Organisation and the International Bank for Reconstruction and Development and International Finance Corporation of the World Bank Group.

The new ETF is the first collaboration between UBS Global Wealth Management and an external fund manager when launching an ETF for promotional bank bonds.

Mark Haefele, Chief Investment Officer, UBS Global Wealth Management, said “Our clients see development bank bonds as an attractive opportunity to diversify their portfolios and to align them with the UN's goals for sustainable development. Exchange-traded funds will continue to be an important tool that gives clients access to this growing asset class.”

Brett Olson, Head of Fixed Income iShares in EMEA, BlackRock, said “More and more clients are using bond ETFs for low-cost, efficient access to certain asset classes. For investors who want to diversify their bond portfolio, bonds from multilateral development banks can be a liquid alternative to other investments in investment-grade bonds in their asset allocation.”

Hassatou N'Sele, Treasurer, African Development Bank, said “the African Development Bank is pleased to be part of this new ETF that enables investors to support our efforts to combat climate change and improve the quality of life. The African Development Bank is an influential institution whose strategy addresses 14 of the 17 Sustainable Development Goals and which leads Africa's transition to inclusive and green growth.”