The latest news in investment offerings, financial products and other services relative to wealth advisors and their clients.

Tabula Investment Management Limited
European exchanged-traded fund provider Tabula Investment Management Limited has launched the world’s first Article 9, Paris-aligned Global High Yield Fallen Angels Climate UCITS ETF. 

The fund has $50 million of assets with seed investment from a large Nordic institution. The Tabula fund 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 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 with 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 in order to increase exposure to any rebound, while retaining exposure over the longer term so as to benefit from any upgrades; and

-- Global exposure: reduces concentration risk in a relatively small market segment by providing exposure to USD, EUR, GBP, CHD, SEK and more currencies.

“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,” CEO Michael John Lytle, said.

“Many fallen angels enter the high yield universe with a BB rating and don’t slip below that level. S&P’s long-term average global default rate is 0.59 per cent for BB, compared to 25.7 per cent for CCC and below, so the default rate for fallen angel exposure is likely to be significantly lower than for broad high yield exposure.”

“In addition to their lower default risk, many fallen angels are also well positioned for upgrades. Fallen angels tend to be large, well-established names. Their business models and financing strategies are built around investment grade borrowing rates, so their management has a strong incentive to address the issues that triggered the downgrade. Obviously, there is good potential for price appreciation if they rebound,” CIO Jason Smith added.

Atlantic House Investments
Atlantic House Investments, a provider of defined returns investments, has launched the Atlantic House Global Defined Returns Fund. The fund, which aims to generate an annualised net return of 8 to 9 per cent per annum over the medium to long-term in all but the bleakest market conditions, is a UCITS fund with daily dealing.

The fund is an evolution of the firm’s flagship £1.7 billion ($2.16 billion) Atlantic House Defined Returns Fund, which has a 10-year track record for delivering defined returns. It uses the same investment expertise and fund managers but is more global in its exposure, allowing investors access to global indices and portfolios, whilst offering more ambitious returns of 8 to 9 per cent per annum. In addition, the fund integrates ESG considerations into its investment process, whilst protecting the delivery of outcomes to clients. The fund combines a diverse portfolio of simple equity derivative investments linked to the performance of one or more developed market equity indices alongside high-quality investment grade bonds, primarily treasuries.

The fund managers use a rules-based investment approach to take positions in derivative investments, referred to as “defined return investments,” which are linked to the performance of one or more large equity indices. Each defined return investment must deliver its target return even if the indices to which it is linked fall up to 20 per cent and remain at or below that level over the life of the investment (typically six years). Moreover, individual investments will not suffer a loss even if the indices to which they are linked were to fall by up to 25 per cent from their starting levels and remain there until maturity.

By using these defined returns investments, the fund manager can model how the fund is likely to perform in various market scenarios and over different time frames. This level of transparency and greater predictability should appeal to investors who seek greater certainty over their investment outcomes.