UK-based ETF provider Tabula Investment Management Limited has listed a sterling-hedged share class of its Article 9, Paris-aligned Global High Yield Fallen Angels Climate UCITS ETF.
The Tabula Global High Yield Fallen Angels Paris-aligned Climate UCITS ETF is designed to maximise the potential returns from fallen angels – bonds that have been downgraded from investment grade – while also aligning with the objectives of the Paris Agreement on climate change.
The new GBP-Hedged share class, TFGD LN, joins the USD and SEK-Hedged share classes (THFA LN and THFSx IX), which launched in June.
The Tabula ETF provides:
• EU SFDR Article 9 Paris-aligned exposure, which reduces portfolio GHG emissions (Scope 1, 2 and 3) by at least 50 per cent compared to the broad market
• MSCI ESG exclusions to reduce negative impacts. These exclusions could also be useful forward-looking quality filters, as rating agencies increasingly consider climate and other ESG risks
• Time-based weighting: The ETF is overweight newly fallen angels so as to increase exposure to any rebound, while retaining exposure over the longer
term so as to benefit from any upgrades
• Global exposure: Reduces concentration risk in a relatively small market segment by providing exposure to USD, EUR, GBP, CHD, SEK and more currencies
“In the first seven months of 2023, European-listed high yield fixed income ETFs saw over USD4 billion of net inflows, compared to USD5 billion of outflows for the same time period last year,” says Tabula Chief Commercial Officer, Stefan Garcia. “As investors redress imbalances in their portfolios, having been underweight fixed income over the past decade, our latest listing for UK investors provides a climate-based solution with attractive yield.”
“When comparing fallen angels to the broader high yield universe, they offer higher credit quality, with the potential to return to investment grade over time,” says Tabula CIO Jason Smith. “There is good potential for price appreciation if they rebound and our ETF’s time-based approach to bond weighting seeks to capitalise on that.”