Highland Capital announces changes to iBoxx Senior Loan ETF

Dec 3rd, 2018 | By | Category: Fixed Income

Highland Capital Partners is to implement changes to the Highland/iBoxx Senior Loan ETF (SNLN US) following a review of the underlying reference benchmark by index provider IHS Markit.

Taylor Ridgely, co-portfolio manager for the Highland/iBoxx Senior Loan ETF

Taylor Ridgely, co-portfolio manager for the Highland/iBoxx Senior Loan ETF.

The fund, which is linked to the Markit iBoxx USD Liquid Leveraged Loans Index, provides exposure to approximately 100 of the largest, most liquid senior bank loans issued in US dollars.

Senior bank loans are debt obligations of a company and are generally paid before other creditors and equity. They are generally floating-rate loans.

The forthcoming changes are the product of an annual review of the family of iBoxx USD Loans Indices which concluded earlier this month.

The most significant alterations include the introduction of a weekly cash reinvestment process, which addresses cash in the index from restructured and/or paid down loans intra-month. The updated methodology will provide a system for reinvesting that cash into the next eligible loans

Additionally, the new rules will also introduce a loans substitution process which provides the ability to substitute a restructured loan with a replacement loan from the same issuer.

According to Highland, which served on the advisory committee that evaluated the proposed changes, the amendments will ensure that the fund represents current loan market dynamics.

Taylor Ridgely, co-portfolio manager for the Highland/iBoxx Senior Loan ETF, commented, “For a passively managed fund, index construction and methodology are key. Enhancing some of the structural features of the index results in exposure that better reflects the realities of the underlying loan market. In turn, this strengthens Highland’s ability to provide strategic, low-cost access to the most liquid part of the loan market in an efficient vehicle via SNLN.”

The changes are expected to take effect in 2019.

SNLN houses over $500 million in assets under management and comes with an expense ratio of 0.55%.

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