Tabula eyes opportunities beyond bond ETFs

‘The question now is ‘what problem are people going to solve?’. Whether it is with traditional active or algorithmic active or structural solutions’

Jamie Gordon

MJ Lytle New headshot

Fixed income specialist Tabula Investment Management is “looking at opportunities” outside of bond ETFs including areas such as actives and alternatives, according to the firm’s CEO Michael John Lytle.

Speaking to ETF Stream, Lytle (pictured) said areas of fixed income remain untapped but the firm is looking for exposures beyond the asset class where they can add value.

“We have continued to look at the slices of exposure in the cash bond space that are getting completely overlooked,” Lytle said.

“We are also looking at the opportunities outside of fixed income that are getting overlooked, that bring the way we look at exposure and solutions and the couple of hundred of institutional investors who buy our products a more interesting toolkit over time.”

He noted ETF assets remain highly concentrated among a handful of core strategies. For instance, around 60% of assets in the equity space are claimed by 20% of funds comprising core exposures. Meanwhile, more esoteric thematic strategies represent approximately 15% of funds but just 3% of assets.

“Fundamentally, it is challenging to try and pick the next hot thing using a fund structure,” Lytle continued. “You have to have high conviction in the exposures you launch nowadays into a market that has 2000 ETFs across the spectrum.”

One ‘hot’ product class Lytle identified is the active ETF space, with active UCITS ETFs welcoming $7.4bn inflows in 2023, up from $2.6bn the year before, according to data from ETFbook.

“The question now is ‘what problem are people going to solve?’,” he said. “Whether it is with traditional active or algorithmic active or structural solutions – like buffer funds – people are going to have to think carefully about the problems they solve, rather than just broad-brush trying to paper the market with active versions of strategies that have been done passively.”

Lytle added “pure passive has been done” but new launches in the active ETF space “do not necessarily mean something people traditionally think of as active”.

He pointed to a “constant interest” in wrapping less liquid assets – including private credit, real estate and infrastructure – within an active daily liquidity wrapper.

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