Tidal Launches First Actively Managed Credit ETF

December 06, 2022

Tidal Financial Group, which manages $6.5 billion, is launching its first credit exchange-traded fund to take advantage of what it sees as a lack of options for investors seeking actively managed funds that invest in loans and bonds. 

Tidal’s new fund, the Senior Secured Credit Opportunities ETF (SECD), began trading today. The price was unchanged at $20.04 and less than 300 shares traded.  

New York-based Tidal, which has issued 55 ETFs, said in a statement that the fund will invest “primarily in a combination of first lien senior secured loans and secured bonds to businesses operating in North America.” The fund will be actively managed in conjunction with investment advisor Gateway Credit Partners. 

The fund may also invest in securities that are rated below investment grade—known as junk bonds—or unrated senior loans or bonds of comparable quality.  

Tim Gramatovich, founder of fund manager Gateway, said in an email to ETF.com that “in both loans and high yield bonds, active management in ETF form is lacking.”  

“Active management in corporate credit is now a requirement, not an option,” he wrote. 

The launch goes against the trend of firms launching passively managed funds, which typically track indexes like the S&P 500 and have lower management fees.  

Currently, there are 2,082 passive ETFs and 987 active ETFs in the U.S., according to ETF.com data.  

SECD’s launch comes as bond ETFs have cemented their status as an integral staple in investor portfolios—especially those looking to diversify—offering a source of steady income and relatively low volatility, while also offering an alternative to mutual funds. 

The ETF will compete with ETFs including the Capital Group Short Duration Income ETF (CGSD), the Vanguard Total Bond Market ETF (BND), the iShares U.S. Treasury Bond ETF (GOVT) and the SPDR Bloomberg High Yield Bond ETF (JNK)

SECD’s portfolio will comprise approximately 50-100 individual instruments, with a target allocation of 1 to 2 percent of the portfolio toward any specific company. Though the fund will invest in securities issued by companies and in bank loans made to companies based in both the U.S. and Canada, its securities will be denominated in U.S. dollars. 

The ETF lists on the NYSE Arca and comes with an expense ratio of 0.95%. 

 

Contact Zoya Mirza at [email protected] 

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