Portfolio manager for the SPDR Blackstone / GSO Senior Loan ETF discusses its structure and composition.
“Structure Matters,” by Dan Weiskopf, portfolio manager of Access ETF Solutions, examines issues about ETF structures in a series of interviews with ETF portfolio managers, index developers and other people who affect the structure of ETFs. The goal of the series is to highlight the different operating roles that individuals have that make the ETF structure work well for the investor.
ETFs offer ease of access to markets, but investors and advisors need to understand the dynamics of how a market can trade. In this interview, Weiskopf and Lee Shaiman, portfolio manager of the actively managed SPDR Blackstone / GSO Senior Loan ETF (SRLN | B), discuss many of the idiosyncratic issues associated with the senior loan market.
Weiskopf: Would you provide us with your background and how you came to join Blackstone?
Lee Shaiman: I am a portfolio manager in the GSO division of Blackstone. I specifically focus on our listed products, predominantly within the loan space. I have been at GSO now for about nine years, essentially since its inception, and with the team for almost 14 years. Prior to that, I spent 14 years at UBS in high yield heading the high-yield, capital-markets desk.
Weiskopf: How did Blackstone come to the conclusion to launch an ETF, and why did you partner with State Street Global Advisors?
Shaiman: Our initial launches came in the form of closed-end funds, which employ leverage to help drive returns, and that’s a big differentiating factor between a closed-end strategy and an open-end or ETF strategy. The next logical place for us was a daily liquidity product. We’d previously been engaged with SSgA through State Street, its parent, mostly in the custody and back-office perspective.
We were looking for ways that we might work together with them on the investment side. We concluded there was synergy between working together to leverage their distribution muscle and product expertise with our bank-loan expertise to run an active strategy, which we agreed was different than what was already available in an ETF.
Weiskopf: What did Blackstone bring to the table?
Shaiman: Blackstone, through GSO, is one of the largest managers of bank loans globally, and we have a long history within the asset class. We bring a lot of heft in terms of size, scope and scale as a manager. In the bank-loan space, that actually matters for a number of reasons.
First, we have a large dedicated credit team. Second, the loan asset class is one that’s very heavily reliant on the primary market. Third, because we’re so large and so involved in the primary market, we often get very good treatment in syndication of primary bank loans. That’s an important aspect in terms of being able to construct a portfolio; getting access to those credits that you want to own in the size in which you want to hold is about firm positioning.
Not being constrained to an index is an advantage for us in SRLN. For example, we can buy a new issue at a discount in the primary market before it hits the secondary market in anticipation of it being included in an index. More often than not, secondary markets for good credit trade at a slight premium to primary pricing.