Industry Updates

ETF Wrap: Increasingly exotic fixed income ETFs hit Europe

New bond exposures, an outgoing CEO and ETF closures made headlines this week

Jamie Gordon

graphical user interface

Fixed income ETFs in Europe welcomed another ‘first’ this week as ETF Stream revealed Tabula Investment Management launched a Gulf Cooperation Council (GCC) strategy, adding to the increasingly granular range of products available to investors.

The Tabula GCC Sovereign USD Bond UCITS ETF (TGCC) listed on the London Stock Exchange with a total expense ratio (TER) of 0.45% after receiving a $30m seed investment.

Tracking the ICE Gulf Cooperation Council Government Bond ex-144a index, TGCC offers exposure to 100 AA to B-rated sovereign bonds issued by six Gulf states, Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait, with a 25% cap per issuer.

Tabula said the ETF offers investors a “granular asset allocation” tool at a time of “rapid economic development” in the region and “ambitious plans to liberalise and diversify their economies". The product also presents an attractive income opportunity with a yield of 5.2%.

Tabula is no stranger to providing access to esoteric corners of the fixed income market, with other products offering exposure to US breakevens, leveraged euro credit markets and even one of the first routes to accessing Chinese corporate debt within an ETF via its emerging markets high yield strategy.

The arrival of TGCC also comes as part of a broader shift to more niche exposures within bond ETFs. Last March, HANetf partnered with Finamex to offer European ETF investors the first pure-play Mexican sovereign bond access via the Finamex Mexico International Sovereign Bond 5-10yr UCITS ETF (MEXS).

In October 2021, Legal & General Investment Management (LGIM) offered the first local currency Indian government bond ETF – a previously uninvestable market for international investors – with the L&G India INR Government Bond UCITS ETF (TIGR).

With bond ETFs claiming 35% of new money in Europe in 2022, proportionately higher than the asset class’s 25% ETF market share, according to data from Bloomberg Intelligence, access to these new frontiers will likely continue as investor interest in wrapped fixed income grows as the product range expands.

Bloomberg indexing welcomes a new chief

Steve Berkley stepped down as CEO of Bloomberg Index Services after nine years, capping off an almost 40-year career in financial services.

Berkley started with Lehman Brothers in 1986, going on to pioneer the Lehman Brothers Aggregate index, which was later acquired by Barclays and renamed following Lehman’s collapse in 2008.

Barkley departed Lehman to join Barclays Global Investors in 2005, prior to its acquisition by BlackRock four years later. After joining BIS in 2014, he was instrumental in Bloomberg’s purchase of the Barclays Risk Analytics and Index Solutions two years later.

Replacing Berkley at the helm in March is current deputy CEO Dave Gedeon, who joined Bloomberg in 2020 after 14 years at Nasdaq.

A closing spree in thematics and crypto

The most volatile markets since the Global Financial Crisis (GFC) have tested the resolve of issuers launching ETFs in increasingly innovative niches and investor appetite for these exotic exposures – a fact evidenced by HANetf, which has terminated seven products since last August.

The white-label ETF issuer recently announced the closure of the Purpose Enterprise Software ESG-S UCITS ETF (SOFT), which amassed just $4m since launching 18 months ago.

This followed the closure of two other equity products, the $4m iClima Smart Energy UCITS ETF (DGEN) and $869k Cleaner Living ESG-S UCITS ETF (DTOX) in recent months, with UCITS funds having a relatively high threshold for breakeven that has become unattainable for some thematic strategies given the current market backdrop.

Whether HANetf, its clients and other issuers hold out for risk-on appetite to return, or announce further closures, will be an area to watch in coming months.

Excluding the strategies earmarked for deletion, there are 12 products on the HANetf platform housing less money than the soon-to-be-terminated SOFT ETF.

ETF Wrap is a weekly digest of the top stories on ETF Stream

Related articles

Featured in this article