Daily ETF Watch: ‘Event’ Debt Fund Planned

Amid deepening anxiety about the global economy a new debt fund looking for value in the bond markets goes into registration.

Managing Editor
Reviewed by: Olly Ludwig
Edited by: Olly Ludwig

Eccles Street Asset Management, a new player in the exchange-traded fund based in Boca Raton, Florida, plans to manage a proposed actively managed “event-driven” ETF that will own fixed-income securities such as corporate debt and bank loans that are poised to gain in value.

The Eccles Street Event Driven Opportunities ETF will target average portfolio duration of three to five years and may include among its various holdings other exchange-traded products, according to the fund’s preliminary prospectus. The ETF was put into registration using the exemptive relief obtained by ETF Series Solutions, a firm backed by longtime industry figures, Brinton Frith and Robert Tull.

The ETF goes into registration at a time when a great deal of uncertainty continues to hang over the global economy, particularly as it relates to the eurozone. Investors are mindful that borrowing rates in the U.S. may well go up this year as the world’s biggest economy continues to grow, but are also concerned that Europe’s sluggishness may well derail the U.S. recovery. Given these opposing forces, the relatively short duration of the proposed fund seems important.

More specifically, the fund will target securities with the following characteristics:

· Debt securities that the sub-adviser, Eccles, believes will be refinanced (often at a call premium) before maturity due to an identifiable catalyst within approximately a 2-3 year period after acquisition

· Debt securities trading below intrinsic value that will mature within approximately three to five years after acquisition, and

· Debt securities paying high yields that the Sub-Adviser believes are likely to be refinanced (e.g., because the issuer is or will be seeking, or the Sub-Adviser believes that the issuer is or will be seeking, to lower its borrowing costs) within approximately the next 2-3 years after acquisition.

The prospectus didn’t include a proposed ticker for the Eccles Street Event Driven Opportunities ETF, nor did it stipulate a proposed annual expense ratio.

Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.