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Pyxis To Challenge BKLN With New ETF

IndexUniverse Staff


Pyxis Funds, the rebranded Dallas-based money management firm formerly known as Highland Funds Asset Management, is launching Wednesday, Nov. 7, its first ETF, a bond fund that would serve up access to senior loans in a strategy that would go head-to-head against a popular PowerShares fund, among others.

The Pyxis/iBoxx Senior Loan ETF (NYSEArca:SNLN) was originally scheduled to launch Tuesday, Oct. 30, but due to the U.S. stock market storm-related shutdown Monday and Tuesday of last week, the launch was rescheduled for Nov. 7, according to the exchange.

The fund will track the Markit iBoxx USD Liquid Leveraged Loan Index and invest primarily in below-investment-grade senior loans to domestic and foreign corporations and partnerships, the company said in the  filing . The ETF will cost 0.55 percent, according to that paperwork.

It seems SNLN is the same fund Pyxis originally registered under the name Pyxis/iBoxx Liquid Loan ETF back in July, a fund that was to be linked to the same index but listed on the Nasdaq under the ticker LQLN.

Senior loans generally have risk profiles that are similar to below-investment-grade securities, but what sets them apart is that they have a right to payment before most other debts a borrower has. That means senior loans have higher recovery rates than other below-investment-grade debt should a company default on debts.

They are also less sensitive to interest rate risk than other high-yield debt because their yields are adjusted for changes in short-term rates. That lowers their correlations to other fixed-income instruments. In the end, a senior loan portfolio allows investors to tap into relatively stable pockets of the capital markets.

SNLN would face the $927 million PowerShares Senior Loan Portfolio (BKLN), the first ETF to serve up direct access to senior loans, which was launched in March 2011, but BKLN costs 0.76 percent, which includes 11 basis points of acquired fund fees.

As noted, SNLN marks Pyxis’ initial foray into the ETF market. The firm, which spun off from Highland at the start of the year, offers some 20 open-end mutual funds and traditional closed-end funds, but no ETFs as of now.


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