IndexIQ, a subsidiary of New York Life Investments, has launched two new ETFs aligned with ESG principles.
The IQ MacKay ESG High Income ETF (IQHI US) and IQ Candriam ESG US Mid Cap Equity ETF (IQSM US) have been listed on NYSE Arca with expense ratios of 0.40% and 0.15%, respectively.
IQHI is an actively managed strategy that seeks high income, distributed monthly, by investing in non-investment-grade fixed income securities including corporate debt, convertible bonds, loans, and loan participation interests. Eligible securities may be sourced from issuers worldwide.
The fund is sub-advised by MacKay Shields, a global asset manager and fellow New York Life Investments affiliate which manages more than $40 billion across its fixed income portfolios.
Day-to-day operations are led by MacKay Shields’ Global Credit team which is led by Eric Gold. The team’s philosophy is rooted in the belief that strong risk-adjusted investment returns can be achieved by eliminating uncompensated risk. The strategy seeks to avoid companies with elevated ESG risks while favouring companies with strong or improving ESG attributes.
IQSM, meanwhile, is a passively managed strategy that is linked to the IQ Candriam ESG US Mid Cap Equity Index. The index offers exposure to a broadly diversified portfolio of US mid-cap equities meeting ESG criteria developed by Candriam.
The methodology targets approximately 70% of the number of constituents from each GICS sector in the mid-cap universe, choosing companies with the most robust ESG profiles.
Candriam’s assessment of ESG criteria is formed along several lines including analyzing a firm’s treatment of customers and employees, environmental initiatives, supplier standards, corporate governance, societal impact, climate change impact, and resources and waste management.
Violators of UN Global Compact principles as well as companies involved with adult content, alcohol, armaments, gambling, nuclear power, tobacco, animal testing, or genetic modification will be ineligible for selection.
Kirk Lehneis, President of IndexIQ ETFs, said: “The teams at MacKay Shields and Candriam are foremost in their fields, and having their insights and unique approaches available to power our newest ETFs is a tremendous benefit to potential investors in these funds. IQHI is a unique solution that can help investors and advisors manage two of today’s biggest portfolio challenges: finding ways to add yield potential while also seeking to avoid potential pitfalls tied to ESG-related risks; while IQSM brings a compelling ESG-focused lens to the US mid-cap category, an area of the equity market that is often underrepresented in investors’ portfolios.”