Stockholm (NordSIP) – State Street Global Advisors, the asset management business of State Street Corporation announced the launch of the State Street Global High Yield Bond ESG Screened Index Fund. The new fund is categorized as an Article 8 fund under the Sustainable Finance Disclosure Regulation (SFDR), invests in high yield bonds, incorporates ESG considerations and tracks the ICE BofA Global High Yield Constrained Index.
The strategy also excludes securities based on UN Global Compact violations, controversial weapons and Swedish Ethical Council criteria. The fund is backed by a leading Europe-based international intermediary, with an initial investment of US$120 million.
“As investors increasingly look for reliable and cost-effective ways to harness the full return potential of fixed income sectors today, this fund can offer exactly that for high yield investors,” David Furey, Head of Fixed Income Strategists EMEA, says. “The structural improvements in high yield markets in recent years, combined with the continuous refinements to our investment process, have made indexing in high yield a viable and attractive option for investors today. Since our first indexed high yield strategy in 2004, we have developed a variety of techniques that seek to control risks and costs very tightly, but to then also take advantage of market inefficiencies that can add incremental value, enabling us to track the performance of high yield benchmarks very closely,” Furey adds.
Article 8 of the SFDR covers the disclosures of funds that “promote environmental and social characteristics”. They stand in the middle of the SFDR spectrum, between Article 9 funds that conduct “sustainable investments” and article 6 funds that merely “integrate sustainability risks” in their investment process.
“As investors seek to build better portfolios to meet their objectives in today’s low-yield environment, we are seeing increasing interest for cost-effective index strategies in the more complex areas of the fixed income markets such as emerging market debt and high yield. We believe that this fund will align well with these needs and can play an important role in investors’ portfolios of the future. Furthermore, the ESG screens applied to the fund not only mitigate the inherent risks associated with funding companies involved in controversies but also ensures that some minimum ESG criteria are applied to the global high yield universe,” Alistair Byrne, Head of UK Institutional Distribution (UK) concludes.
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