A new ETF provider is set to launch a range of fixed income funds targeting European institutional investors including insurance companies, pension funds, asset managers, private banks and wealth managers.
Tabula Investment Management’s sales team will cover the UK, Ireland, Germany, France, Switzerland, Austria, Belgium, Luxembourg, the Netherlands and the Nordics.
The new firm 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. Hasan Sabri will be COO. Sabri has over 30 years of experience in FinTech, asset management and banking. He has held roles as diverse as the CEO of MyInvest, COO of MoneyFarm and COO of GLG Partners (now part of Man Group).
Tabula will focus on fixed income, supporting investors as flows into the asset class accelerate. The company believes that although fundamentals and market dynamics are positive for fixed income ETFs, the persistent innovation that ignited the equity ETF market has been lacking in this sector. The firm writes that, as a result, the large incumbent funds continue to gather assets, but investors are hungry for new products.
Tabula will launch its first ETFs soon, providing new and more precise tools for passive credit exposure. Tabula plans to expand 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.
Lytle says: “Passive strategies account for only 5 per cent of fixed income fund assets, compared to 30 per cent 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.”
The firm comments that 2017 saw record inflows of USD140 billion into fixed income ETFs and that new research by Tabula reveals that investors expect this trend to continue.
The research showed that 53 per cent of investors believe 2018 will be a record year for inflows into fixed income ETFs. By 2020, the research revealed that 51 per cent predict there will be USD1.6 trillion or more in fixed income ETFs, up from USD600 billion in 2016.
However, 38 per cent of investors say the level of innovation in the fixed income ETF space is less than in the equity ETF market, with just 11 per cent saying it’s higher.
Tabula is working in partnerships and alliances with HSBC, IHS Markit, KB Associates, ICE andPwC. Until such time as Tabula receives its own authorisation, it will be an Appointed Representative of Cheyne Capital, which is authorised and regulated by the Financial Conduct Authority.
HSBC is providing custody and administration services to Tabula and says that it has taken a holistic approach to supporting the new venture, providing a range of banking services that most institutions would reserve for larger, more established businesses.
Cian Burke, Global Head of HSBC Securities Services, says: “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. Ireland is central to this development and we have worked very hard to ensure we are leaders in this space”
IHS Markit will provide benchmark CDS indices for Tabula’s first ETFs. Benchmark CDS indices from IHS Markit are based on some of the most liquid credit instruments globally and are administered in accordance with the IOSCO Principles for Financial Benchmarks and the EU Benchmark Regulation.
Max Ruscher, Director of CDS Indices at IHS Markit says: “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.”
KB Associates (“KBA”) has partnered with Tabula to support the establishment of the ETF in Ireland. KBA will also be responsible for UCITS governance services. On top of that KBA will provide an extensive range of ancillary services including director services, company secretary services and MLRO services.
Mike Kirby, Managing Principal at KBA, says: “We are delighted that Tabula has chosen KBA as its governance and compliance partner in Ireland. KBA currently supports a number of both active and passive ETF structures in Ireland and we are very pleased to now work with Tabula. We are excited both by the market opportunity which Tabula has identified and by its dynamic approach”.
