Exchange-traded Funds  

Tabula launches ETF targeting 5% yield

Tabula launches ETF targeting 5% yield

European fixed income provider, Tabula Investment, has launched its first European Performance credit (ETF).

The ETF aims to provide a competitive yield without the interest rate risk of traditional corporate bond indices.

The product tracks the iTraxx European Performance Credit index, a new index developed by Tabula in partnership with IHS Markit.

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According to Michael John Lytle, chief executive of Tabula, the ETF offers well-diversified European credit exposure, mostly investment grade but with a degree of high yield.

The ETF currently yields approximately 5 per cent, according to Mr Lytle, and, he claimed in simulations over 10 years, has outperformed both high yield and investment grade benchmarks.

Mr Lytle said: "European corporates look healthy and credit is reasonably priced but, with rate hikes on the horizon, not everyone wants the interest rate risk inherent in corporate bonds.

"Specialist credit managers can isolate and manage credit risk using credit default swap
indices. This is a liquid and efficient market, but isn't accessible to all asset managers.

"Our new ETF gives you the same kind of control – precise credit exposure and the ability to increase or decrease it whenever you want to."

Patrick Connolly, Chartered financial planner at Chase de Vere, said: "There is a huge choice of ETF products available and, as they can be broadly homogenous products, the right selection is often based on the level of charges and experience of the provider.

"While Tabula may not rank highly in these respects, they have produced their own index and selection methodology to try and achieve out-performance and effectively manage risk.

"European fixed interest will have a relatively low weighting in most portfolios and, while the back-testing figures seem impressive, investors and advisers are unlikely to take a leap of faith on day one."

The new ETF will be available on the London Stock Exchange, and will have an ongoing charge figure of 0.5 per cent.