Tabula IM: Expansion plans to focus on core markets beyond credit
Cash bond products among sectors being considered
Tabula Investment Management CEO Michael John Lytle has said the firm’s product pipeline will focus on "core markets outside of credit", as it looks to expand its nascent offering.
Following the joint launch of the Tabula J.P. Morgan Global Credit Volatility Premium Index UCITS ETF in the spring of 2019, which provides investors with access to alternative risk premia, Lytle said that while the firm's peers have traditionally tried to expand into equity ETFs, "the key" lies elsewhere.
"We will be looking at some cash bond products, but not in the way everybody else has," he said.
"Alternative risk premia is basically this idea of credit volatility having value and is less about views on credit and more about views on capturing alternative value. So you could actually do that with other asset classes as well.
"[Providers] have traditionally tried to do it with equities, with their own challenges. The key is to get exposure to some of the core markets outside of credit.
"We need to look at rates, inflation and other places to look at different instruments that are interesting."
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Tabula is also looking to expand its fund range with further joint ventures and currently has "a whole number of those sorts of conversations" ongoing.
Lytle said: "It is not for us to find something that no one has ever thought of before, it is for us to identify pockets of value that have not been delivered into this toolkit yet".
The firm launched three other products in addition to the J.P. Morgan partnered fund earlier this year and plans to launch another two products in the next month along with "another dozen or so" in 2020.
Further to this, Tabula has four funds that have been approved by the Irish Central Bank and are ready to launch if there is enough investor demand.
However, Lytle clarified, "we do not have unlimited amounts of seed to bring new funds into the market, so it is better to leave them for now".
Bolstering the product range is part of Tabula's plan to build out a toolkit that would make them more "relevant".
"One fund is not a toolkit; maybe at five you are beginning, at ten, you are starting to look more interesting."
Current figures suggest 2019 is set to see the largest ever annual inflows for fixed income ETFs, according to data from FactSet.
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Furthermore, fixed income ETFs are on course to see the highest inflows of all ETF sectors, overtaking the traditionally stronger-performing equity space, a positive sign for fixed income-focused Tabula.
"People seem to be voting with their feet," said Lytle, "but 30 or so ETFs still represent half the assets [in the market]".
While many ETF providers have reduced their fees of late, most recently Vanguard, Lytle said this will not impact fixed income providers.
He noted that "fixed income has not had the same price war" as fees have remained at their already-low level.
He added the fee reductions were "irrelevant" because "knocking a few basis points off the fees is not going to make the difference between success and failure".
Lytle attributed the closure of several ETFs in the past month to a "normal part of the fund industry", which he described as "absolutely vital".
"I would turn it around and say, I cannot believe how few products we have seen closed over the years," he said.
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