Tabula said the fund had $50m of assets with seed investment from a large Nordic institution, which was not named.
The fund is designed to maximise the potential returns from what it describes as ‘fallen angels’, which are bonds that have been downgraded from investment grade, while aligning with climate change objectives.
Tabula launches first Gulf Cooperation Council Government Bond ETF
Stefan Garcia, CCO at Tabula IM, noted the investment manager’s assets in Article 8 and 9 funds have grown to 80% of its ETF AUM.
“This launch highlights our market-leading expertise in sustainability-related exposures and Paris-aligned solutions for institutional investors,” he added.
Michael Lytle, Tabula CEO, said the targeted assets offer “higher credit quality” with the potential to return to investment grade over time, when compared to the broader high-yield universe.
He said: “Many fallen angels enter the high-yield universe with a BB rating and don’t slip below that level. S&P’s long-term average global default rate is 0.59% for BB, compared to 25.7% for CCC and below, so the default rate for fallen angel exposure is likely to be significantly lower than for broad high yield exposure.”
Tabula CIO Jason Smith added: “In addition to their lower default risk, many fallen angels are also well positioned for upgrades. Fallen angels tend to be large, well-established names.
“Their business models and financing strategies are built around investment grade borrowing rates, so their management has a strong incentive to address the issues that triggered the downgrade. Obviously, there is good potential for price appreciation if they rebound.”
Total exchange ratio for the USD share class will be set at 0.5% and 0.55% for currency-hedged share classes.
The Global High Yield Fallen Angels ETF has been listed on the London Stock Exchange, and Tabula said an SEK-hedged class will be offered on the Chicago Board Options Exchange (Cboe) as well.
