Blackstone and State Street launch high income ETF
State Street and Blackstone (not to be confused with weirdly similarly named BlackRock) are teaming up to launch an actively managed high yield ETF that invests in the junk debts of US companies.
The SPDR Blackstone High Income ETF (HYBL) is run by Blackstone Credit, the debt investing arm of the private equity beast.
Blackstone looks for USD denominated corporate bonds, senior loans, and collateralised debt obligations with sub-investment grade (“junk”) credit ratings. It chooses investments based on top-down and bottom-up analyses. Top-down analysis involves looking at the economy as a whole or certain sectors of it. Bottom up involves studying the specific company.
The benchmark Blackstone is trying to beat is the SPDR Blackstone High Income Composite Index. This is a 50/50 blend of a junk bond and leveraged loan index.
The fund charges 0.70% and was launched with $120M seed.
HYBL is the second partner product between State Street and Blackstone. The first was the SPDR Blackstone Senior Loan ETF (SRLN) which holds $10 billion on the same fee.
Bernie’s commentary – just buy Blackstone’s shares
SRLN has been very successful, and currently holds $10 billion on a 0.70% fee—putting it on a $70 million run rate. (Assuming no rebates). This would make it one of the most profitable ETFs in the world, although it’s gains must be shared between two mouths.
Personally, I find SRLN’s success somewhat surprising given its performance. Each year, SRLN’s NAV declines by a similar amount to its yield. Which to me suggests it’s paying out capital. SRLN has underperformed almost every other one of State Street’s bond ETFs. So looking at the data I’m not sure what makes it desirable to so many investors compared with State Street’s other bond ETFs.
If history repeats, then the likely winner of this ETF launch is likely to be Blackstone. The private equity powerhouse has seen its share price skyrocket the past 5 years, as investors clamour for its opaque and high fee investment products. (Chris Flood at the Financial Times has a really good piece on this). Investors who think today’s launch is clever or attractive, maybe consider checking out Blackstone’s shares.