A Hermes impact fund launched for Mitch Reznick and Fraser Lundie will be the first product launched in conjunction with its US parent Federated Investors.
The SDG Engagement High Yield Credit funds will be offered as a Ucits for European investors and a mutual fund for US investors that will be advised by Federated Investors and sub-advised by Hermes.
Federated Investors acquired a 60% stake in Hermes from the BT Pension Scheme in April 2018.
“The key is to identify the companies that reflect potential to effect change and to work with them in pursuit of realised change,” said Reznick. “As such, this is not a portfolio of SDG leaders, but one that we believe over time can be.”
UBS distribution deal
UBS has a six-month exclusivity arrangement to distribute the Ucits version of the fund.
AJ Bell head of active portfolios Ryan Hughes thought the fund would be well received once the period of exclusivity with UBS was up.
Hughes added: “It is perhaps surprising that Hermes haven’t already launched an explicit bond fund focusing on ESG and it is interesting that this new launch has an explicit engagement and impact focus that will surely become more prevalent in the coming years.”
SDGs relatively unique in fixed income
The fund will also have a lead engager, Arron Hay, who says the fund will be focused on companies where there is room for improvement on impact.
Taking a sustainable development goals (SDG) approach within credit is “relatively unique” with the impact approach usually applied in equity funds, said Hay. Tobacco and controversial weapons will be excluded from the investment universe.
A German real estate company is among the issuers that feature in the portfolio at launch.
Hay said the company could do a better job of communicating its social impact via affordable housing and its efforts to mitigate their environmental impact.
Hermes EOS predominantly engages on equity but does engage when it comes to credit also.
