Tabula’s credit volatility premia ETF surpasses €150m milestone

Sep 18th, 2019 | By | Category: Alternatives / Multi-Asset

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Tabula Investment Management‘s credit volatility premia ETF – the Tabula J.P. Morgan Global Credit Volatility Premium Index UCITS ETF – has surpassed €150m in assets under management, less than six months since its launch.

MJ Lytle, Chief Executive, Tabula Investment Management

Michael John Lytle, CEO of Tabula Investment Management.

The fund, which debuted on the London Stock Exchange (TVOL LN) in March and has since cross-listed on Xetra (TBVL GY) and BX Swiss (TVOL SW), has become one of the most successful new product launches in Europe this year.

The fund is linked to the J.P. Morgan Global Credit Volatility Premium Index and effectively captures the difference between realized and implied volatility in North American and European high yield credit default swap (CDS) markets.

The underlying index reflects the performance of selling options on European and North American high yield CDS indices (iTraxx Crossover 5y Index and Markit CDX HY 5y Index respectively) while hedging out exposure to credit spreads on a daily basis through delta hedging.

The fund is swap-based with residual cash collateral invested in short-dated government bonds, further enhancing potential returns. It comes with ongoing charges of 0.50%.

Thanks in large part to the success of this fund, Tabula’s company-wide AUM now stands at a healthy €180m.

The London-headquartered firm, which was founded by ETF veteran Michael John (“MJ”) Lytle, has carved out a niche delivering fixed income exposures that were previously typically the domain of institutional-size sophisticated investors to the mainstream via accessible ETF structures.

In addition to the credit volatility premia ETF, Tabula’s ETFs offer leveraged investment-grade credit exposure and long and short high yield credit exposures. Tabula notes that all its funds are designed to be building blocks for fixed income and multi-asset portfolios, as either core holdings or tactical positions.

The funds are registered for distribution in 15 European countries and are available to trade on the London Stock Exchange, BX Swiss, Xetra, and Börse Berlin.

Commenting on the milestone, MJ Lytle, CEO of Tabula, said, “Our ETFs have struck a chord with many types of investors, from wealth managers and asset managers to banks and insurance companies. Investors clearly need a broader range of tools for taking and managing fixed income exposure. Using ISDAs and posting collateral don’t fit many investors’ business plans. And managing interest rate exposure in a world of negative government rates poses many challenges not addressed by traditional bond ETFs. Our funds combine specialist solutions with the transparency and liquidity of a UCITS ETF.”

He added, “We’re listening to what investors want. The fixed income market is highly complex, with many evolving opportunities and specialist instruments. We are making these accessible to a wider group of investors, helping them to manage fixed income risks more precisely and find new sources of return.”

More innovative funds appear to be on the way. According to Tabula, its product pipeline includes ETFs linked to inflation and corporate bonds, as well as liquidity solutions, blended portfolios, and ESG and Solvency II-efficient funds.

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