Chinese manager teams up with Tabula to launch high-yield ESG ETF
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Haitong International Asset Management has teamed up with Tabula Investment Management to launch an Asia ex-Japan high-yield corporate environmental, social and governance bond exchange traded fund in London.
The Tabula Haitong Asia ex-Japan High Yield Corporate Bond ESG ETF tracks the iBoxx MSCI ESG USD Asia ex-Japan High Yield Capped Index, a new index developed by Haitong International AM, UK-based Tabula Investment Management and IHS Markit.
The new ETF has an ongoing charge of 0.6 per cent per annum.
The ETF is the first of its kind to combine Asian high-yield bond investments with ESG considerations in the form of an ETF, according to Haitong International.
Frederick Chu, Hong Kong-based head of ETF business at Haitong International, said that despite recent reports suggesting Chinese real estate issuers faced greater default risk and referencing volatility in the Asian high-yield market, the average Asian high-yield issuance is 300 basis points higher than US high-yield bonds.
Meanwhile, the average default rate remains below 3 per cent, lower than the 4-5 per cent default rate for US high yield bonds, Chu added.
As investors in Europe and Asia were now demonstrating stronger demand for ESG products, Haitong had decided to apply an “ESG tilt” to the original high-yield index, the iBoxx USD Asia ex-Japan Corporate High Yield Index, as well as introducing some restraints to limit its risk exposure, he said.
The adjusted index, which is rebalanced monthly, only includes Asian high-yield bonds rated BBB or higher according to MSCI ESG ratings.
Total exposure to real estate sector issuance is capped at 50 per cent, from the more than 60 per cent allocation of the original index.
The new ETF has already attracted the attention of some European pension funds and multi-asset managers, as well as investors from the Middle East, Chu said.
In Asia, life insurance companies and multi-asset managers “are also showing” interest in the product, he added.
Chu said Haitong planned to list the ETF on other European exchanges and eventually hoped to bring the ETF to Hong Kong.
“Haitong International Asset Management is one of the most experienced leaders in the high-yield space, as well as one of the largest players among our peers in terms of fixed-income assets under management,” said Shengzu Wang, global head of asset management at Haitong International.
“We are delighted to bring to market an innovative product which fills in an existing market gap,” he added.
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