Tracking the iTraxx European Crossover Credit Short Index, TECS is comprised of 75 sub-investment grade bonds, all equally weighted with an ongoing charge of 0.50%.
TECS offers investors exposure to short European corporate credit and hedge against credit risk. This is enabled by using credit default swaps (CDS) rather than corporate bonds. Introducing CDS means the issuer of the debt insures the potential losses the buyer might incur in the case of default.
Michael John Lytle, CEO at Tabula, said in a statement: "We strongly believe in making CDS indices more accessible. 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."
Following the bear market experienced in Q4 last year, investors are tactically positioning themselves against volatile markets, according to Lytle. Therefore products like TECS are growing in demand.
Tabula says it is planning to further expand its fixed income ETF offering with more investment grade and high yield bonds, inflation, credit volatility and money market exposure.
The performance of the benchmark index, iTraxx European Crossover Credit Short Index, has not been positive prior to 2018. The index has seen significant losses ranging from 4-10% every year between 2013-2017, according to Tabula's fund factsheet. The only positive returns seen from the underlying index was last year which produced returns of 1.8%, whilst the equity market in general was in decline. So far this year, the equity market has bounced back and therefore the index has dipped again, producing losses of 2.3% YTD.