As in the past, the fund will continue to invest in primarily short-dated bonds in dollar currencies (US dollars, Canadian dollars, Australian dollars, and New Zealand dollars) following the conversion. However, many issuers – such as the US government (and thus US government bonds) – are now no longer eligible for investment. Such assets have hardly played a role in the fund anyway, as the fund portfolio has gradually been switched to a sustainable investment approach. Therefore, the amended fund rules and the new fund name are merely retroactively implementing what has already been a reality in the investment policy of Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent for quite some time.
Use of negative criteria and ESG metrics
The ESG metrics calculated by Raiffeisen KAG and negative criteria are applied. Government issuers that are excluded due to the sustainability criteria can be replaced with issuers such as highly rated supranational organisations (e.g. international development banks), European government financing agencies, and certain public sector entities (e.g. individual Canadian provinces). Issuers that are not located in the USA, Canada, Australia, or New Zealand also issue bonds in dollar currencies, including the Kreditanstalt für Wiederaufbau and the European Investment Bank. The same can be said for many internationally active companies
When it comes to the selection of the bonds and issuers, Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent follows the same proven sustainability investment process for international bonds as Raiffeisen-Nachhaltigkeit-Mix – limited to the indicated dollar currencies, naturally.
The bond portfolio constructed in this way will continue to be actively managed by the investment specialists at Raiffeisen KAG with regard to the currencies, duration, and yield curves as well as with regard to the ratings and spreads of the corporate bonds in the fund portfolio.
Advantages and disadvantages of the fund
One of the advantages of Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent for euro-based investors lies in the diversification beyond the Eurozone, an aspect that is paying off handsomely at the moment in light of the weak euro and the strong US dollar. At the same time, however, this advantage represents a risk because it also entails corresponding foreign currency risks if the euro strengthens against the dollar currencies. Depending on the market situation, Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent also allows higher interest income to be generated than in the Eurozone in some cases. This has been frequently true in recent years. This too can change or shift at any time in the future, and this effect can be strengthened or nullified by exchange rate movements.
Investors should keep the following in mind
Due to the current low or negative capital market yields, the interest income generated by Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent is not currently sufficient to cover the ongoing costs and will likely not be sufficient in the near future. Reliable longer-term forecasts are not possible in light of the uncertainty of future market developments.
The fund rules of Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent were approved by the Financial Market Authority. Raiffeisen-Nachhaltigkeit-Dollar-ShortTerm-Rent may invest over 35% of the fund assets in securities or money market instruments issued or guaranteed by the United States of America, the European Investment Bank, the International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development, the Nordic Investment Bank, the Inter-American Development Bank, or the Asian Development Bank by way of investment in individual instruments and/or by way of investment in other investment funds; an investment in a single issue may make up no more than 30% of the fund assets.