UBS and BlackRock Launch MDB Debt ETF

    Stockholm (NordSIP) – UBS has announced it has seeded BlackRock‘s multilateral development bank (MDB) debt ETF, the iShares USD Development Bank Bonds UCITS ETF.

    The ETF tracks the FTSE World Broad Investment-Grade USD MDB Bond Capped Index. The appeal of MDB debt is the safety of the typically high credit ratings, their high liquidity, and the spread they offer over US Treasuries. Estimates from research published by the Inter-American Development Bank (IADB) suggest MDB bond yield spreads could range between 15 and 75 basis points.

    “More and more clients are using fixed-income ETFs for low-cost, efficient access to specific asset classes,” Brett Olson, Head of Fixed Income iShares in EMEA for BlackRock commented. “As investors seek to diversify their bond portfolios, debt of multi-lateral development banks can be a liquid substitute for other investment-grade credit exposures within their asset allocations.”

    With assets of over USD 120 million, the new ETF will be included in certain UBS Global Wealth Management (GWM) mandates and offered on GWM platforms as an alternative to traditional high-quality fixed-income investments, according to UBS.

    “Our clients see development bank debt as an attractive means of diversifying their portfolios and focusing them on the United Nations Sustainable Development Goals,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. “ Exchange-traded funds will continue to represent an important route for clients to access this growing asset class.”

    The FTSE index offers exposure to US dollar debt securities issued by African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), IADB, International Development Association (IDA), and the World Bank Group’s International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC). Each issuer carries a AAA credit rating from at least one major rating agency, has the US as a member, and has pledged support for critical UN SDGs.

    “The African Development Bank is delighted to be a constituent of this new ETF, which allows investors to support our efforts in tackling climate change and improving quality of life,” said Hassatou N’Sele, Treasurer of the African Development Bank. T“he AfDB is an impactful institution whose strategy addresses 14 of the 17 SDGs, and is leading Africa’s transition to inclusive and green growth.”

    The fund will be distributed in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

    Following this investment, UBS reports it now oversees more than USD 1 billion of client assets in development bank debt.

    This is not the first MDB ETF that UBS is associated with. The asset manager also offers its clients the opportunity to invest in such ETFs as the  “UBS ETF (LU) Sustainable Development Bank Bonds UCITS ETF”, which provides diversified exposure to sustainable bonds issued by IBRD, IFC, IDA, EBRD AfDB and ADB. At the end of 2019, NordSIP reported on UBS’s bet on MDB debt ETFs. In the Spring of 2018, UBS partnered with Solactive to launch the “Solactive UBS Global Multilateral Development Bank Bond” index.

    Image by Rudy Gort from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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