The fund is positioned to capture a more attractive spread/yield compared to the benchmark, while maintaining a conservative portfolio. The current spread (OAS to government bonds) of 150 bps and average rating of BBB+ compares very favourably to green and non-green Euro investment grade bonds, where spreads are around 95 bps.
During the quarter there were several tactical adjustments to the fund. One of these was taking advantage of attractive new issues, such as Uniqa, which came with a new green Tier 2. This was the group’s second green Tier 2, a 2.375% EUR Tier 2 with a maturity in 2041 and callable in 2031. At a spread at issuance of 235 bps, this came at the wider end of the Euro Insurance Tier 2 market, particularly attractive for a BBB rated bond (A- issuer rating). We switched from the shorter dated 3.25% 2035 bonds (callable in 2025) given a very steep spread curve (70-75 bps pick-up in spread).We also added new positions, including UniCredit and NIBC; two green senior preferred bonds (senior bonds from banks that are outside of the scope of bail-in) that offer spreads similar to senior non preferred (bail-inable senior) of core European banks.