Investments 

Tabula launches high yield ETF

Tabula launches high yield ETF

European fixed income provider Tabula has launched an exchange traded fund (ETF) which will invest in the European High Yield corporate bond market.

High yield bonds are those with a credit rating of below BBB+.

The Tabula European iTraxx Crossover Credit UCITS ETF will track the European Crossover Credit Index and will also invest in credit default swaps, with the company stating this was the first passive product tracking European High Yield bonds to include these instruments.

Tabula chief executive Michael John Lytle said: "A common investor concern surrounds owning high yield bonds in a passive vehicle during times of market stress.

"A lack of liquidity in individual bonds can become a challenge. Spreads can widen significantly, and individual bonds can see varying levels of investor demand. This is exactly the time when investors want to adjust their positions."

He added: "Several providers have launched short duration high yield funds in order to tap into the yield of lower rated credits while limiting volatility and interest rate risk.

"Using CDS crossover indices offers a relatively stable full 5 year credit spread duration but with only limited interest rate exposure and tight bid-offer spreads."

The yield on the assets to be held within the ETF is currently 3.99 per cent.

The ETF has an ongoing charge of 0.4 per cent.

Scott Gallacher, financial adviser at Rowley Turton in Leicester said: "It seems somewhat niche. It could have use as part of a larger portfolio but I suspect its main use will be by DFMs and Fund of Funds as a way of gaining exposure to this area."

david.thorpe@ft.com