On Wednesday, Obra Capital sprung into the exchange traded space with two launches on the NYSE platform. They are the Obra Opportunistic Structured Products ETF and the Obra High Grade Structured Products ETF (OGSP).
Both funds primarily seek current income and preservation of capital. Each of Obra’s funds is actively managed and has a net expense ratio of 0.90%. Additionally, neither fund aims to follow an index’s performance.
“Through OOSP and OGSP, we aim to provide investors with investment options with access to a wide variety of securitized products. We intend to deploy a dynamic approach, which will allow the team to shift allocation based on changing market conditions while working to deliver a dividend every quarter,” Obra Capital CEO and President Blair Wallace noted.
As the names imply, each of Obra’s ETFs primarily invests in structured products. According to the fund prospectus, these can include asset-backed securities, receivables, CDOs, CMOs, and mortgage-backed securities, among others.
OOSP uses an opportunity investment strategy to allocate investment. This strategy focuses on evaluating a security’s opportunity for return in comparison to potential risk.
Meanwhile, OGSP primarily invests in investment-grade structured products. OGSP also uses Obra’s opportunity-focused approach in seeking high-grade structured products.
Investment Opportunity
In looking at a security’s opportunity for both funds, Obra applies a mixture of fundamental, quantitative, and structural analysis. The firm also uses a top-down analysis to evaluate the state of play of the current economy. In evaluating risk, OOSP uses a bottom-up analysis to evaluate volatile factors, such as default risk and asset concentration.
Obra refers to both OGSP and OOSP as “go-anywhere funds.” As go-anywhere funds, OOSP and OGSP can invest in any kind of structured product that the firm’s analysis indicates may provide a good opportunity. The prospectus adds that neither fund intends to focus on specific tranches of investment or underlying asset categories.
For both funds, up to 20% of their assets may be allocated to debt securities. The prospectus notes that OOSP may invest in securities of any maturity, duration, or credit quality. While OGSP can also allocate assets regardless of duration or maturity, the fund’s high-quality focus indicates that credit quality will face more scrutiny.
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