Tabula unveils European high yield ETF


The Tabula European iTraxx Crossover Credit UCITS ETF is listed on the London Stock Exchange with a total expense ratio (TER) of 0.40%.

Tracking the iTraxx European Crossover Credit index, the ETF offers investors exposure to 75 securities across the European sub-investment grade corporate credit spectrum.

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Rebalanced monthly, the new index was developed in partnership with IHS Markit.

Currently yielding 3.99%, the ETF provides beta exposure to credit default swaps (CDS), in this case high yield credits, and each security is equally weighted to avoid large sector biases.

The firm said CDS indices tend to offer higher liquidity versus traditional high yield funds which have to manage individual liquidity risk, with European crossover, the spot where a bond sits either side of the divide between investment grade and high yield, attracting $1.8bn in daily trading.

Michael John Lytle, CEO of Tabula, commented: “A common investor concern surrounds owning high yield bonds in a passive vehicle during times of market stress.

“A lack of liquidity in individual bonds can become a challenge. Spreads can widen significantly, and individual bonds can see varying levels of investor demand. This is exactly the time when investors want to adjust their positions.

“Several providers have launched short duration high yield funds in order to tap into the yield of lower rated credits while limiting volatility and interest rate risk.

“Using CDS crossover indices offers a relatively stable full 5-year credit spread duration but with only limited interest rate exposure and tight bid-offer spreads.”

In September, Investment Week revealed Tabula’s first product since the launch of the firm in May to be the Tabula European Performance Credit UCITS ETF.

The firm plans to further expand its offering with new products across the fixed income spectrum, from investment grade and high yield credit to inflation, credit volatility, money markets and broader market exposure.