UBS Asset Management has introduced the UBS Sustainable Development Bank Bonds 5-10 Index UCITS ETF (MDB5), a new fixed income fund targeting high-quality, medium-term debt issued by development banks.
UBS has launched its second ETF targeting high-quality bonds issued by development banks.
Development banks, such as the World Bank, Asian Development Bank, and European Bank for Reconstruction and Development, are supranational entities established to finance projects that foster positive social and economic outcomes in developing countries.
Their funded initiatives span a wide range of objectives but are generally aligned with the United Nations’ 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals.
Key focus areas for these banks include environmental protection, healthcare infrastructure improvement, clean energy promotion, and poverty reduction in underdeveloped regions.
The new fund complements the existing $1.8 billion UBS Sustainable Development Bank Bonds UCITS ETF (MDBU), which provides broader exposure to development bank bonds across all maturities.
Together, these ETFs are crafted to provide investors with access to a niche segment of the fixed income market that is often overlooked in core bond portfolios, while simultaneously supporting high-impact global development initiatives.
The bonds within these funds are backed by the robust credit ratings of supranational issuers, offering a compelling blend of attractive yield, ample liquidity, and a commitment to social responsibility.
Each ETF has an expense ratio of 0.15%.
Methodology
The ETF tracks the Solactive Global Multilateral Development Bank Bond USD 25% Issuer Capped 5-10 Index. Bonds included in the index must meet strict criteria, such as a minimum issue size of $500 million and a credit rating of at least AA-.
The index specifically focuses on bonds with maturities in the five-to-ten-year range, appealing to investors seeking medium-duration exposure with high credit quality.
The index employs a market capitalization weighting approach with a 25% cap per issuer to promote diversification.