Tabula launches European performance credit ETF
New European fixed income ETF provider Tabula Investment Management has launched its first ETF, the Tabula European Performance Credit UCITS ETF, designed to offer passive exposure to European corporate credit.
The firm writes that it aims to provide a competitive yield without the interest rate risk of traditional corporate bond indices, saying that the ETF could be used to replace long-term bond holdings or for tactical credit exposure.
“European corporates look healthy and credit is reasonably priced but, with rate hikes on the horizon, not everyone wants the interest rate risk inherent in corporate bonds”, says Tabula CEO Michael John Lytle.
“Specialist credit managers can isolate and manage credit risk using credit default swap indices,” says Lytle. “This is a liquid and efficient market, but it isn’t accessible to all asset managers. Our new ETF gives you the same kind of control - precise credit exposure and the ability to increase or decrease it whenever you want to.”
The new ETF is also performance-focused. “It is designed to replace traditional bond holdings, and hence offer a competitive yield,” says Lytle.
“When you remove interest rate risk, you’re removing one source of yield. Our ETF compensates for this by taking on more exposure to credit spread.”
The Tabula European Performance Credit UCITS ETF currently yields approximately 5 per cent and, in simulations over 10 years, has outperformed both high yield and investment grade benchmarks. Ongoing charges are 0.50 per cent and income is reinvested.
“To enhance yield, you typically need to reduce credit quality or increase duration. However, if you have a positive view on European credit, it makes sense to scale up that exposure instead,” adds Lytle.
This is the first of a range of fixed income ETFs from Tabula. “We’re a new ETF provider but we have many years’ experience in fixed income and are focused on creating better passive products,” says Lytle.
Tabula plans to expand its offering across the asset class, from investment grade and high yield credit to inflation, bank capital, money markets, ESG strategies and Solvency II-efficient funds.
Lida Eslami, Head of London ETP Business Development, London Stock Exchange Group says: “We are delighted to welcome Tabula as new issuer on London Stock Exchange and congratulate them on their ETF launch. Their new fixed income ETF adds to the diverse range of funds available on our markets offering exposure to a broad range of fixed income assets from government bonds to corporate credit. London is the premier listing and trading venue for ETFs in Europe and we look forward to developing our relationship with Tabula in the future.”