By Elena Logutenkova
Sept. 20 (Bloomberg) — UBS AG, the world’s biggest wealth manager, said it raised its first fund that will seek to make a social impact through investments in global development projects as the company builds its philanthropy unit.
“This is another step in the right direction, with many more steps to come,” Juerg Zeltner, head of wealth management excluding Americas, said in a telephone interview. “We’re building out our philanthropic offering in wealth management, whether it be a client event, or our own foundation or the impact investment fund. We will continue to have investments in this area because we firmly believe that it is critical.”
UBS raised $50 million from its super-rich clients for the fund, which promises net returns of about 10 percent after fees. Switzerland’s biggest bank, based in Zurich, partnered with Obviam, a team of investment managers who’ve managed the Swiss government’s development projects since 1999.
Less than $40 billion in capital has been committed to impact investments globally, according to a World Economic Forum report published yesterday. Zeltner said engaging in impact investment may help banks rebuild their reputation in the aftermath of the global financial crisis, which forced some of the world’s largest lenders, including UBS, to seek aid.
“After what has happened to us over the last couple of years, we have to redefine our role in society,” Zeltner said. “It’s true for the industry and it’s also true for UBS. We have a role to play through impact investing and we can rebuild our reputation in a credible way.”
UBS decided to get involved in impact investing four years ago and started raising its first fund in November 2011, said Mario Marconi, head of philanthropy and values-based investing. Most clients are still unfamiliar with the concept of impact investing and marketing of the fund required an effort to educate potential customers and UBS’s own advisers, he said.
Almost half of the fund’s capital came from investors in Switzerland, while customers in the U.K. and Hong Kong also contributed, Andreas Ernst, head of impact investing at UBS, said in a telephone interview. Investors, who had to commit at least $250,000 to the fund, will get annual reports, detailing what impact their investment made, he said.
The fund will invest in other private-equity funds, taking stakes in 50 to 80 small and medium-sized enterprises in emerging markets, focusing on health care, education, infrastructure, agriculture and sustainable forestry sectors. UBS already invested $3 million each in a fund dedicated to developing renewable power generation in Indonesia, Thailand, the Philippines and Malaysia and in a fund that seeks to improve education in India.
The fund’s targeted return of about 10 percent is “conservative,” according to Ernst. The Obviam team achieved average annual returns of more than 23 percent for a similarly structured Swiss government fund, he said.
“Doing good through investments isn’t something that has to be financially unattractive,” Marconi said.
To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkovabloomberg.net
To contact the editor responsible for this story: Frank Connelly at email@example.com