Industry Updates

Fixed income specialist Tabula launches high yield ETF

George Geddes

a group of birds on a ledge

Fixed income specialist Tabula has launched a high yield ETF, adding to its now three-strong range of ETFs. The Tabula European iTraxx Crossover Credit UCITS ETF (TECC) offers passive exposure to European sub-investment grade corporate credit. TECC is said to include credit with limited interest rate risk compared to traditional bond indices, according to Tabula.

The ETF offers exposure to Credit Default Swaps (CDS), in this case high yield credits, tracking the European iTraxx Crossover Index. Tabula says CDS indices offer a higher degree of liquidity with $80bn daily turnover with European Crossover accounting for around $1.8bn. An issue which occurs when passively investing in high yield bonds is the lack of liquidity in each bond which comprises the benchmark.

TECC currently yields approximately 3.99 per cent, according to Tabula. Listing on the London Stock Exchange, TECC has an ongoing charge of 0.40 per cent.

The index iTraxx European Crossover Credit Index, the benchmark for TECC, is a newly developed index as a result of a partnership between Tabula and IHS Markit. It reflects the return from selling protection on the current series of each CDS index.

The company sets to expand its range in the future, including products offering exposure to investment grade and high yield credit, inflation, volatility and money markets.

John Lytle, CEO at Tabula, said in a statement: "We strongly believe in democratising access to CDS indices. They were previously only available to a small group of specialised institutional investors. We are making them available in a transparent UCITS ETF, which extends the tool kit for fixed income investors to efficiently manoeuvre in difficult market environments"

Benchmark index

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Source: Tabula TECC Factsheet

As there is no data available until the fund is 12-months old, the benchmark iTraxx European Crossover Credit Index shows a positive performance from 2008 to 2017. The index had returns as high as 8.0 per cent in the 2014. However last year did see a slide of -2.8 per cent but still shows a strong performance over the last decade.

The early stages of the above graph is the economy recovering from the financial crisis and recession in 2008, however Tabula says the index saw returns of 3.6 per cent in 2016 and even reach highs of 7.5 per cent in 2017.


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