Tabula Investment Management (Tabula), a London-based asset manager focused on fixed income, has entered the Italian ETF market by listing the Tabula iTraxx IG Bond UCITS ETF (TTRX) on Borsa Italiana. Tabula says it is bringing Italian investors a unique product that offers targeted exposure to euro-denominated investment grade bonds of European issuers, based on the methodology of the iTraxx Europe benchmark index which reflects the 125 most liquid European investment grade credit default swaps.
The dynamic Italian ETF market presents a strong opportunity for ETF providers like Tabula. Borsa Italiana’s ETFplus market stood at EUR90 billion at the end of June 2020, having recorded a 12-month increase of 18.1 per cent. Almost 45 per cent of this AuM is invested in fixed income ETFs, significantly more than the European average of around 30 per cent.
The Tabula iTraxx IG Bond UCITS ETF tracks the iBoxx iTraxx Europe Bond Index, created by Tabula in collaboration with IHS Markit. The index adopts the iTraxx Europe methodology for the selection and sector concentration of issuers and the investment universe of the iBoxx index for the selection of the respective bonds. Unlike most European bond indices, which include Euro-denominated bonds of any global issuer, the iBoxx iTraxx Europe Bond Index includes only bonds of European issuers. An important feature of this instrument is that it weights issuers equally and applies fixed sector limits, avoiding significant sector overweights to, for example, financials. The index has a constant average maturity of five years, shorter than most comparable indices, which facilitates more efficient hedging, useful for managing interest rate and credit risks. Additionally, the index has an “AA” rating calculated by MSCI ESG Research.
“We are very excited to bring our European IG bond ETF to the Borsa Italiana,” says Michael John Lytle, CEO of Tabula, “This is Tabula’s first Italian listing and demonstrates our commitment to bring innovative fixed income ETFs to a key and significant market. With almost half of Italian-listed ETF AuM in the fixed income asset class, Italian investors have shown themselves to be leaders in passive fixed income investing. Our entry into the market will undoubtedly spur the demand for precise credit exposures.”
“With the introduction of TTRX, Tabula brings Italian investors an innovative and efficient product, the best expression of our expertise in fixed income,” says Franco Mancini, Tabula’s Italian country manager. “TTRX is the answer to the inefficiencies typical of generic European credit benchmarks. The methodology of the index has among its main objectives liquidity of the underlying assets, constant duration and fixed sector limits. These are essential characteristics for precise allocations and targeted risk control. The ETF delivers all of the above, while obtaining an ESG AA rating from MSCI. We are pleased to offer the Italian market a new and unique investment tool in the core European corporate IG asset class.”