Tabula Investment Management is preparing to make its debut with the launch of a range of fixed income ETFs in Europe. The firm’s first ETFs will provide exposure to credit default swap (CDS) indices from IHS Markit.
MJ Lytle, CEO, Tubula Investment Management.
The company believes that fundamentals and market dynamics are positive for fixed income ETFs. It notes there were record inflows of $140 billion into these funds last year and research shows that investors expect this trend to continue.
For example, 53% of investors believe 2018 will be a record year for inflows into fixed income ETFs, while 51% predict there will be $1.6 trillion or more in fixed income ETFs by 2020, up from $600bn in 2016, according to research commissioned by the firm.
Despite the positive outlook, the research suggests that the persistent innovation that ignited the equity ETF market has been lacking in this sector: 38% of investors say the level of innovation in the fixed income ETF space is less than that in the equity ETF market, with just 11% saying it’s higher. As a result, the large incumbent funds continue to gather assets, but investors are hungry for new products.
To meet this demand for innovation, Tabula’s future product launches will focus on fixed income, supporting investors as flows into the asset class accelerate. The firm plans to build out its offering across the asset class, moving from investment grade and high yield credit into inflation, government debt, emerging markets, bank capital, money markets, ESG strategies and Solvency II-efficient funds.
The company will be led by Michael John (‘MJ’) Lytle as CEO. Lytle was one of the founding partners of independent ETF provider Source, acquired last year by Invesco. Prior to that he spent 18 years at Morgan Stanley, mainly in fixed income.”[pullquote]”Passive strategies account for only 5% of fixed income fund assets, compared to 30% for equities. We expect this gap to close, but how quickly will depend on how compelling the available funds are.”
– Michael John (‘MJ’) Lytle, CEO of Tabula Investment Management[/pullquote]
Lytle commented, “Passive strategies account for only 5% of fixed income fund assets, compared to 30% for equities. We expect this gap to close, but how quickly will depend on how compelling the available funds are. There are currently over 400 fixed income ETFs in Europe, but almost half of the assets are concentrated in the top 20. We are optimistic that delivering precise exposure and addressing specific investment needs will resonate with investors and complement existing products.”
Hasan Sabri will be COO. He has previously been CEO of MyInvest, COO of MoneyFarm and COO of GLG Partners (now part of Man Group).
Tabula will conduct business in the UK, Ireland, Germany, France, Switzerland, Austria, Belgium, Luxembourg, the Netherlands and the Nordics. Infrastructure and control functions will be provided by alternative investment manager Cheyne Capital, while HSBC will provide custody, administration and banking services.
Cian Burke, global head of HSBC Securities Services, commented, “We are delighted that Tabula has chosen HSBC to service these new ETFs. We have invested heavily in both our ETF technology and people, and continue to do so. HSBC is proud to partner Tabula in what we believe to be an innovative approach to the market. ETFs continue to play a large part of the growth in the European investment fund industry.”
Max Ruscher, Director of CDS Indices at IHS Markit added: “We are delighted that Tabula will work with IHS Markit to further innovation and expand the product range available to fixed income investors today. IHS Markit remains committed to delivering innovation, while enhancing the transparency and liquidity of global fixed income markets.”