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ESG portfolio off to a good start in HK, says UBS

After its launch in Asia in April, UBS Wealth Management’s sustainable cross-asset portfolio has gathered $100m (CHF$100m) in assets from Asia-Pacific clients, according to the bank's executives.
Amy Lo, UBS Wealth Management

To-date, the AUM is close to CHF 200m, Amy Lo, UBS Wealth’s Hong Kong-based chairman and head of Greater China, said during a roundtable discussion in Hong Kong this week.

There are at least 100 clients invested in the sustainable portfolio, Lo noted. “A big chunk is coming from Hong Kong. We also have quite a number of investors from mainland China.”

Lo added that a minority of the investors belong to family offices. “Some of them said that in due course, they would want 100% of their investments to be in impact or sustainable investing. But they have their own asset guidelines among themselves.”

Bank officials said they are seeing both new money and current clients switching to the new portfolio. Around half of the sustainable portfolio’s assets are new money, while the other half came from investments that were previously allocated to the bank’s traditional portfolios, according to Lo.

Globally, AUM in the bank’s sustainable portfolio has reached CHF 2.45bn since it first launched in Europe in January.

Impact fund interest

The sustainable portfolio was launched in the region after the bank said it noted interest from Asia-based clients in sustainable investments.

For example, about half of the $325m raised for the Rise Fund, a private equity impact investment fund managed by TPG that was launched last year, came from UBS’ Asia-Pacific clients.

In 2016, the Oncology Impact Fund, which invests in companies that are active in cancer research, was created exclusively for UBS by US-based healthcare fund manager MPM Capital. At the time, $471m was raised from the bank’s clients, half of which came from Asia.

Mario Knoepfel, Hong Kong-based head of sustainable and impact investing advisory for Asia-Pacific, said portfolio diversification is a driver for Asia-Pacific investors. UBS Wealth’s clients in the region are allocated more to Asian markets, which have not performed well this year.

Year-to-date, the MSCI All Country Asia Index is down -5.85%, while the MSCI All Country World Index is up 0.77%, according to FE data.

“In our conversations with clients, they have realised that global diversification should help them stabilise their portfolios and generate more gradual returns in this more volatile environment,” Knoepfel said.

Portfolio performance

The bank has three versions of the sustainable portfolio: yield, balanced and growth. The portfolio composition is divided into categories, which the bank believes will help capture sustainable and impact opportunities, UBS executives said previously. It has four categories under the strategy’s equity sleeve and three under the fixed income sleeve.

Source: UBS Wealth Management

Despite the more volatile environment, all three sustainable portfolios were positive year-to-date and have outperformed the bank’s traditional portfolios by 1%, according to Adrian Zuercher, Hong Kong-based head of asset allocation for Asia-Pacific.

“We also try to tactically shift between the assets, so we do not remain static on the allocations. If we see more opportunities on the equity side, then we would shift from bonds to equities and vice versa,” he said, but did not elaborate on the portfolio’s returns and geographic allocations.

In Asia, most clients prefer the balanced strategy, Knoepfel added.

Part of the Bonhill Group.