Global wealth manager UBS successfully created an impact investing fund that will direct investments into small- and medium-sized enterprises (SMEs) in emerging markets – or countries with less than US $10,000 per capita.
Managed by pioneer and veteran of impact investing and development projects Obviam, the Swiss bank’s new fund gathered $50 million from extremely wealthy clients and promises net returns of about 10 percent, reports the Vancouver Sun’s Chinese newspaper Taiyangbao. Investors had to commit at minimum $250,000 into the fund, and will receive annual reports of the impact their investments made.
With over half of the world’s workforce employed by SMEs, and over 95 percent in rising economies such as Indonesia, these businesses play an important role in most economies. But their financial needs are often unmet.
The fund, by investing through other private-equity funds, will take equity stakes in 50 to 80 SMEs focusing on healthcare, education, access to finance, infrastructure, and agriculture and sustainable forestry sectors. Already UBS had invested $3 million in both developing renewable power generation in Southeast Asia and an education fund in India.
Responding on the firm’s new focus, the chief of wealth management at UBS Juerg Zeltner says this is only one step in the right direction, with many more to come as the firm expands philanthropic services in wealth management. Zeltner adds that there is a need for UBS and the banking industry as a whole to redefine their roles in society, and that engaging in impact investing is a credible opportunity for banks to rebuild their reputation following the global financial crisis.
Going back to the fund, returns are still a key piece of the conversation. Head of impact investing Andreas Ernst says that the fund’s targeted return of 10 percent is “conservative”. A similarly structured Swiss government fund by Obviam achieved annual returns of more than 23 percent.
Work to establish the fund began approximately two years ago and required much effort to educate clients as well as UBS’s own advisors, reflecting the sector’s embryonic state. Outside of investment in the fund, investors are able to co-invest together with UBS to make additional impact investments.
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