UBS Asset Management has announced that its UBS S&P 500 ESG UCITS ETF (S5SD LN), has touched $1 billion in assets under management.
UBS introduced the first ETF globally to provide ESG-screened exposure to the S&P 500.
The fund, which tracks the S&P 500 ESG Index using direct physical replication, was the first ETF globally to follow an official socially responsible version of the bellwether S&P 500.
The index methodology excludes tobacco and controversial weapons companies as well as firms with the poorest ESG profiles that make up 25% of the market capitalization within each Global Industry Classification Standard (GICS) Industry Group.
The $1bn milestone was reached on Wednesday 26 August 2020, just 16 months after the ETF made its debut in April 2018. Very recent flows have turned negative with the fund dipping back below the $1bn mark but fund assets are still up substantially.
The achievement is primarily attributable to bumper net inflows that coincided with the US stock market’s rally following the Covid-19 market sell-off in February and March – the fund held just $268m AUM when the S&P 500 bottomed out on 23 March.
The ETF has recorded positive net inflows every month this year (up to August month-end), attracting over $580m between 1 January and 31 August. Nearly $520m of this has flowed into the ETF since the beginning of April.
Market performance has also helped. The fund is also up 55.3% between 23 March and 4 September, slightly above the 54.3% return on the S&P 500 over the same period. Part of this outperformance can be attributed to the ESG index’s larger exposure to information technology stocks (30.5% vs. 28.7% in the S&P 500) which have been the primary driver of the stock market’s charge in recent months.
Looking back over the ETF’s entire trading history, the fund has outperformed the S&P 500 by 5.5% since inception (before fees), equivalent to more than 3.5% per annum. According to UBS, attribution results indicate that this outperformance is well diversified across sectors and primarily stems from the selection of higher ESG-rated companies.
Clemens Reuter, Global Head of Passive & ETF Investment Specialists at UBS Asset Management, commented, “Over the last ten years we’ve built a sustainable ETF product shelf tailored to meeting investors’ different needs. Our funds provide a range of ‘shades of green,’ offering clients the opportunity to select the best solutions for their portfolios. As investor demand for sustainable products continues to grow, the S&P 500 ESG ETF will remain an excellent option for those seeking an ESG solution for accessing this key US equities portfolio building block.”
Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices, added “We are pleased to see investors quickly adopting the S&P 500 ESG Index as the leading independent ESG benchmark for US equity. The strong demand for ESG index-based portfolios underscores our belief that investors will continue to integrate ESG values into the core of their investments.”
The ETF is listed on London Stock Exchange, Xetra, Borsa Italiana, and SIX Swiss Exchange and is also available in three currency-hedged share classes relative to the euro, pound sterling, or Swiss franc. The unhedged version of the fund comes with an expense ratio of 0.12%, while the currency-hedged share classes cost 0.22%.
Invesco also offers an ETF that tracks the same index but uses synthetic (swap-based) replication. The Invesco S&P 500 ESG UCITS ETF (SPXE LN) houses $110m AUM and comes with a management fee of 0.09% and a swap fee of 0.11%.