BlueBay has expanded its ESG lineup with a diversified total return-focused credit strategy, the fourth ESG-focused fund launched by the company this year, Citywire selector can reveal exclusively.
Based in Luxembourg, the BlueBay Total Return Diversified Credit ESG fund currently has 40 million dollars (35.5 million euros) in assets under management but is expected to increase when it is launched.
It will be managed by Raphael Robelin, Head of Multi-Asset Credit at BlueBay, with Blair Reid as senior portfolio manager and Maria Satizabal as portfolio manager.
The fund is categorized under Article 8 of the Sustainable Finance Disclosure Regulation and will use BlueBay’s ESG research to provide ESG filtered opportunities in global high yield markets, bank loans, capital bonds. investment grade financial, structured credit, convertible bonds, emerging and developed markets. .
Talk to Citywire selector, Reid said the fund operates as a sibling to BlueBay’s standard multi-asset lending strategy and reflects ESG’s current demand in multi-asset lending.
The new fund straddles 75% of the flagship fund, but its credit risk has been increased slightly to an average of BB in order to produce a return similar to that of the standard multi-asset credit strategy, which has medium credit risk. from BB +.
This approach differs from the majority of ESG multi-asset credit (MAC) strategies on the market, which operate on a similar level of credit risk and therefore offer a slightly lower return than their non-ESG counterparts.
Reid, however, said that a lower yield discourages MAC ESG investors, and reducing ESG risk outweighs increasing credit risk.
“If you do more ESG, you will inevitably end up with a safer portfolio, and safer portfolios have lower returns. What was clear to us was that there was certainly a demand for more ESGs, but investors were less prone to a drop in yield. So minimizing the yield loss meant taking a little more credit risk, ”said Reid. Citywire selector.
Unlike its flagship sister, the MAC ESG strategy excludes issuers in the very high ESG risk category and has minimal exposure to high ESG risk issuers, which will only be taken into account if they are on a medium trajectory. .
Sovereigns who have not ratified the Paris Agreement, as well as controversial arms and tobacco companies, are excluded from the fund. Likewise, companies deriving revenue from oil sands and Arctic drilling will be avoided.
Exposure to emerging market companies and sovereigns, which typically have lower ESG scores, has been reduced to 25% from 45% in the flagship strategy, although the fund is able to increase exposure for purposes commitment.
The strategy, however, has limited exposure to companies that derive income from the exploration and production of thermal coal or fossil fuels, in cases where coal as a legacy asset accounts for less than 5% of the business. .