Tabula has partnered with Haitong International Asset Management to launch Europe’s first Asia ex-Japan high yield corporate bond ESG ETF.
The Tabula Haitong Asia ex-Japan High Yield Corp USD Bond ESG UCITS ETF (TAHY) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.60%.
Developed by Tabula, Haitong and IHS Markit, TAHY tracks the iBoxx MSCI ESG USD Asia ex-Japan High Yield Capped index which offers exposure to US dollar-denominated high yield bonds with a minimum size of $250m.
Incorporating MSCI data, the index used ESG tilts by overweighting issuers with higher ESG ratings or positive ESG momentum.
It also incorporates an ESG exclusions methodology that removes issuers involved in certain controversial business activities.
TAHY is classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).
Michael John Lytle (pictured), CEO of Tabula, commented: “While the opportunity in Asian high yield is clear, there are also some challenges to address.
“With high yield issuers, there can be greater concerns about ESG, particularly governance, and liquidity is also a consideration. Local expertise can significantly improve trading efficiency.
“Working in partnership with Haitong, leveraging their considerable experience and on-the-ground presence in the region, as well as IHS Markit, we have been able to address these opportunities.”
Frederick Chu, head of ETF business at Haitong, added: “Asian credit is now a trillion-dollar asset class - and China the world’s second-largest bond market – but many European investors are significantly underweight. This ETF provides straightforward access to the US dollar segment of Asia’s high yield market, while also addressing ESG and liquidity challenges.
“As well as yield, this market can provide interesting diversification benefits in a fixed income portfolio, since it is often at a different stage in the market cycle. It is also worth noting that default rates for US dollar Asian high yield bonds have been significantly lower than for US high yield bonds.”
TAHY is the second ETF the firm has launched this year. In January, Tabula unveiled Europe's first investment grade bond climate change ETF, the Tabula EUR IG Bond Paris-aligned Climate UCITS ETF (TABC).