and other U.S. corporations are parking cash in a new socially conscious offering managed by
Goldman Sachs Group
The $1.5 billion money-market fund helps corporate treasurers steer money to bond brokerages operated by minorities, women and veterans, reflecting a growing shift toward investing with environmental, social and governance, or ESG, principles.
Money management is crucial for companies such as Apple, which had a $245 billion cash pile at the end of 2018. But there are few ESG options among money-market funds, which invest about $3.3 trillion for clients in short-term bonds issued by high-quality government and corporate borrowers.
“We had a lot of demand from corporate clients asking what was available,” said Christina Kopec, a managing director focused on liquidity solutions at Goldman Sachs Asset Management. “The answer is, ‘not a lot.’”
Structuring investment vehicles that fulfill ESG objectives without compromising returns can be time consuming, but Goldman saw a relatively simple opportunity last fall in the creation of a money-market fund focused on a market that already had a built-in ESG element, Ms. Kopec said.
The firm repurposed an existing money-market fund in December to invest in government debt, especially so-called agency notes issued by the Federal Home Loan Mortgage Corp., with an additional mandate to prioritize buying from bond dealers that are certified as being owned by minorities, women and veterans. The fund, which buys about half of its assets from such dealers, has since doubled in size, attracting $850 million in the first half of 2019.
Minority and women-owned dealers tend to have less capital than their competitors and the Goldman fund directs business their way as long as they offer attractive pricing on the securities they sell, Ms. Kopec said. The ESG money-market fund returned 2.23% in the 12 months through June, compared with a 2.10% average return for comparable peers, according to data from Goldman.
JetBlue was one of the first corporate clients to buy into the revamped fund.
“They approached us with what is fundamentally a diversity product,” said Sophia Mendelsohn, JetBlue’s head of sustainability. “It made it easy for our treasury department to do their traditional jobs, while bringing into account another element.”
The airline is continuing to consult with Goldman and other investment banks to find other ESG financial products, she said.
For Apple, the Goldman fund fits into the company’s broad initiative to increase diversity.
“We’re proud to have been at the forefront of developing this fund,” said Gary Wipfler, the company’s corporate treasurer. “We hope this fund will help bring more opportunities for diverse firms and investors.”
U.S. government-bond yields fell Wednesday, with the yield on the benchmark 10-year Treasury note recently trading at 2.051%, according to Tradeweb, from 2.074% on Tuesday. Yields fall as bond prices rise.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell slightly to 90.41 from 90.47 Tuesday.
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