Credit Suisse Asset Management has introduced two new ETFs providing socially responsible exposure to US small-cap equity and developed real estate exposures.
More than $2bn in assets now reside in Credit Suisse ETFs.
They are the CSIF (IE) MSCI USA Small Cap ESG Leaders Blue UCITS ETF and the CSIF (IE) FTSE EPRA Nareit Developed Green Blue UCITS ETF.
Credit Suisse marked its return to the ETF industry in March 2020 with the launch of three index-based ETFs following a seven-year absence.
These initial funds have been well-received by investors having gathered more than $2 billion in assets under management, buoyed by the absorption of Luxembourg-domiciled funds tracking the same indices and a healthy dollop of internally directed flows.
The largest of the three ETFs, the $1.2bn CSIF (IE) MSCI USA Blue UCITS ETF, offers straightforward exposure to US large- and mid-cap equities.
Valerio Schmitz-Esser, Head of Credit Suisse Asset Management Index Solutions, commented, “Our long-standing experience in index funds has given us the requisite know-how to succeed in ETFs. The efficiency of our processes and the precision of our techniques make our ETFs ideally positioned to take full advantage of the potential in this segment.”
All five Credit Suisse ETFs are listed in US dollars on SIX Swiss Exchange as well as in euros on Deutsche Börse Xetra and Borsa Italiana. The funds do not participate in securities lending.
US small-cap
The CSIF (IE) MSCI USA Small Cap ESG Leaders Blue UCITS ETF (USSMC SW; CSY8 GY; USSMC IM) tracks the MSCI USA Small Cap ESG Leaders Index which is based on the parent MSCI USA Small Cap Index universe of US-listed companies with market capitalizations below $10bn.
Using insights from MSCI ESG Research, the methodology first excludes companies with business activities in the alcohol, tobacco, gambling, nuclear power, and weapons industries as well as firms that are embroiled in severe ESG-related controversies.
The remaining constituents are assigned an ESG score between AAA and CCC based on the most relevant ESG factors by industry and risk exposure. The rating process aims to identify ESG leaders and laggards within each industry.
The index selects the securities with the highest ESG scores while targeting a 50% sector representation versus the parent index. Firms with ratings below BB are not eligible for inclusion. Chosen constituents are weighted by free float-adjusted market cap.
The ETF comes with an expense ratio of 0.20%.
The fund complements Credit Suisse’s two existing ESG Leaders ETFs which focus on US large- and mid-cap equities as well as stocks from developed markets globally. The $740 million CSIF (IE) MSCI USA ESG Leaders Blue UCITS ETF and $80m CSIF (IE) MSCI World ESG Leaders Blue UCITS ETF have expense ratios of 0.10% and 0.15%, respectively.
Global real estate
Meanwhile, the CSIF (IE) FTSE EPRA Nareit Developed Green Blue UCITS ETF (GREIT SW; CSYZ GY; GREIT IM) provides exposure to a portfolio of real estate assets while tilting towards energy-efficient and renewables-linked properties.
The fund is linked to the FTSE EPRA Nareit Developed Green Index which is based on the parent FTSE EPRA Nareit Developed Index universe that covers real estate investment trusts (REITs) and other property companies listed in developed markets globally.
The methodology tilts the weight of constituents in the parent index to favour those firms with higher ‘Green Certification’ and lower ‘Energy Usage’ scores. A company’s Green Certification score is determined through the proportion of its total net leasable area that is dedicated to producing renewable energy, while its Energy Usage score is derived using its average energy consumption per square metre of net leasable area.
To assess the sustainability performance of the constituents, FTSE Russell harnesses building-by-building geolocation data mapping from GeoPhy. GeoPhy currently maps over 15 million buildings which covers real estate holdings for 93% of the constituents of the FTSE EPRA Nareit Developed Index. This data is then matched with green certification data and provides the basis for detailed energy use and carbon emissions modelling.
According to FTSE Russell, the methodology results in a similar risk/return profile to the parent index while significantly improving climate and sustainability performance. The index is reviewed and rebalanced annually in September.
The ETF comes with an expense ratio of 0.25%.