Devon Funds has secured seed investors for its newly launched ‘green’ corporate bond fund featuring Australian firm, Artesian, as underlying manager.
Greg Smith, Devon head of retail, said the Artesian Green and Sustainable Bond Fund went live last week with several investors already committed and a queue of interested advisory groups.
“The initial discussions we’ve had with financial advisers – especially those in the ethical investing space – have been very positive,” Smith said.
Structured as a portfolio investment entity (PIE), the new Devon product invests into an Artesian fund established in 2020 targeting a portfolio of ‘pure’ green investment grade corporate bonds.
Currently, the portfolio holds 47 bonds split almost equally between Australian (53 per cent) and global issuers including an overweight exposure to NZ with an average duration of about two years.
Since inception until the end of April this year the Artesian fund has returned just over 1 per cent per annum gross in a period spanning one of the worst years for bond markets globally: however, the strategy has beat the Bloomberg AusBond Composite 0-5 Year Index by 1.28 per cent over the same timeframe.
In a statement, Devon managing director, Slade Robertson, said the Artesian PIE, hedged to NZ dollars, would “have significant appeal for local investors”.
“Artesian has a strong investment team with robust investment processes, and a strong track record,” Robertson said. “Their rigorous approach to sustainable investing is an excellent fit with Devon’s own responsible investing framework.”
Devon launched two sustainable-label global funds last year managed by US firm, Wellington, covering fixed income and equities.
Smith said the two Wellington-managed products have grown to about $50 million apiece.
The Wellington global bond fund, however, has a wider brief than the Artesian strategy.
According to the product disclosure statement, the Devon Artesian fund charges sit at 0.59 per cent (plus GST) composed of a 0.34 per cent management fee and 0.25 per cent for administration.
Founded in 2004 in Sydney, Artesian has about A$1 billion under management across its specialist fixed income and venture capital vehicles.
Demand for green bond funds, which target specific ESG outcomes as well as financial returns, is expected to grow. The Devon fund, for example, follows the launch of a green bond strategy by Pathfinder earlier this year, which uses UK-based company, Affirmative Investment Management (AIM), as underlying manager.
Pathfinder has more than $100 million in the green bond fund sourced from wholesale and retail investors.