ETF Watch: Hedge Fund Manager Plans First ETF

Saba Capital Management, a New York-based hedge fund manager known for its credit-relative-value strategy, is looking to enter the ETF space for the first time with an offering that would focus on closed-end funds.

Exchange-Traded Concepts—the third-party issuer behind the “ETF-In-A-Box” solution—filed the prospectus for Saba Interest Rate Hedged CEF ETF (CEFS) with the Securities and Exchange Commission. Saba Capital is subadvising the fund. 

CEFS is an actively managed ETF designed to capture high yield by investing in a range of securities covering a wide range of maturities.

The ETF will typically own securities issued by closed-end funds—including mortgage-backed, asset-backed, inflation-protected securities, equities, investment-grade and high-yield debt, etc.—as well as securities that hedge against the fund’s exposure to interest rates, according to the prospectus.

CEFS would enter a segment populated by ETFs that include the $640 million PowerShares CEF Income Composite Portfolio (PCEF) and the $115 million YieldShares High Income ETF (YYY).

In 2016, these asset allocation ETFs that look to closed-end-funds for yield delivered solid performance, as seen in the chart below:

Chart courtesy of StockCharts.com

No fees were disclosed in the filing. CEFS is expected to list on Bats, which owns ETF.com.

Contact Cinthia Murphy at [email protected]