Correspondence 0001829126-23-007704 from BondBloxx ETF Trust (CIK 0001879238)
BondBloxx ETF Trust (CIK 0001879238)
Date: Nov. 28, 2023 · CIK: 0001879238 · Accession: 0001829126-23-007704
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File numbers found in text: 333-258986, 811-23731
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ROPES & GRAY LLP
THREE EMBARCADERO CENTER
SAN FRANCISCO, CA 94111-4006
WWW.ROPESGRAY.COM
November 28, 2023
Edward
B. Baer
T
+1 415 315 6328
edward.baer@ropesgray.com
VIA
EDGAR
Securities
and Exchange Commission
100
F Street, NE
Washington,
DC 20549
Attn:
Kimberly A. Browning
Re: BondBloxx
ETF Trust (the “Registrant”)
File
Nos. 333-258986 and 811-23731
Dear
Ms. Browning:
This
letter is being filed to respond to the telephonic comments received from you on October 16, 2023 regarding the staff of the Securities
and Exchange Commission’s (the “SEC”) review of Post-Effective Amendment No. 21 to the Registrant’s registration
statement on Form N-1A (the “Registration Statement”) filed with the SEC on September 1, 2023. The staff’s comments
are summarized in bold to the best of our understanding, followed by the Registrant’s responses. The Registrant’s responses
will be reflected, to the extent applicable, in a post-effective amendment to the Registration Statement, which the Registrant expects
to be filed on or about December 7, 2023. Capitalized terms not defined in this letter have the meanings assigned to them in the Registration
Statement.
Fund
Overview
Other
1. Please
remove the “ticker” and “stock exchange” line out of the summary
prospectus. This is not permitted or required by Items 2-8. See General Instruction C.3(b)
of Form N-1A.
The
Registrant intends to make the requested change.
Fee
Table
2. The
“Principal Investment Strategies” section provides that “securities of
other registered investment companies, including exchange-traded funds (“ETFs”),”
are included in the Fund’s investments with respect to 20% of its net assets. If acquired
fund fees and expenses (“AFFEs”) from such investments will exceed 0.01% of the
average net assets of the Fund, please disclose these fees and expenses as a separate line
item in the fee table. Further, if included as a separate line item, please also disclose
in a footnote to the fee table that AFFEs are based on estimated amounts for the current
fiscal year. Otherwise, please confirm supplementally that such expenses, if any, are reflected
in “Other Expenses.” See Instruction 3(f)(i) to Item 3.
The
Registrant confirms that, if AFFEs exceed 0.01% of the average net assets of the Fund, the Fund will include a separate line item in
the fee table for AFFE. The Fund’s AFFE is not expected to exceed 0.01% of the average net assets of the Fund at this time, and
as a result, any such expenses will be reflected in “Other Expenses.”
Principal
Investment Strategies
3. Regarding
the first sentence of the first paragraph under “Principal Investment Strategies,”
please disclose the name of the Index. The staff may have additional comments after the name
of the Index has been disclosed.
The
name of the Index is “Bloomberg Global Inflation-Linked Select Countries Index.”
4. The
staff notes the disclosure in the first paragraph under “Principal Investment Strategies”
stating that the “Index measures the performance of investment-grade, government inflation-linked
debt from 12 different developed market countries.”
a.
Please
revise the Fund’s investment objective as necessary to reference “12 different
developed market countries.”
The
Registrant will update the description of the Index to reflect that it measures the performance of investment-grade, government inflation-linked
bonds from nine different developed countries. In connection therewith, the Registrant will revise the investment objective to reference
nine different developed market countries.
b. Please
ensure that the description of the Index is harmonized throughout the Registration Statement.
The
Registrant acknowledges the staff’s comments and will ensure that the description of the Index is harmonized throughout the Registration
Statement.
5. Regarding
the second sentence of the first paragraph under “Principal Investment Strategies,”
please clarify what performance is being measured (e.g., total return of the bonds) and over
what period.
The
Registrant will revise the first paragraph as follows in response to the staff’s comment (additions in bold/underline; deletions
in strikethrough):
The
Fund is newly organized, non-diversified and seeks to track the investment results (i.e., the total return) of the [Bloomberg
Global Inflation LinkedInflation-Linked Select Countries Index (Series-L)] (the “Index”)
before fees and expenses of the Fund. The Index measures the performance of investment-grade, government inflation-linked
debtbonds from 12nine different developed market countries. Inflation-linked
bonds are structured to protect against inflation by linking the bond’s principal and interest payments to an inflation index so
that principal and interest adjust to reflect changes in the index. Some examples of well-known global inflation-linked bonds include
UK Index-Linked Gilts and Japanese inflation-linked bonds (JGBi).
-2-
The
Registrant supplementally notes that the Fund will seek to track the performance of the Index from the inception of the Fund.
6. The
second paragraph under “Principal Investment Strategies” describes the Index
criteria.
a.
Please
clarify the issuers for the Index constituents. The staff notes, for example, that “government”
is not identified as a criteria. Accordingly, please revise as necessary.
The
Registrant will make the requested change.
b. Please
clarify the index weighting methodology.
The Index typically consists of all of the
securities that meet the Index inclusion criteria specified in the “Principal Investment Strategies” section. The weighings
are determined by calculating the ratio of the individual bonds value relative to the total value of the eligible bonds in the Index.
In addition, the weightings of the various Index components are subject to the following limitation:
Other
than the United States, no single country’s securities may constitute 25% or more of the securities included in the Index.
c. Please
disclose the number of index components that are normally included in the Index (a range
is sufficient) as of a recent date. Please also specify the types of bonds included.
The
Registrant intends to add the requested disclosure to Item 9. The Registrant notes as of November 15, 2023, there were 141 investment-grade,
government inflation-linked bonds in the Index.
d. Please
define in plain English the term “capital-indexed” and provide a few examples.
The
Registrant intends to add the following disclosure for clarity: Capital-indexed means that the principal amount is adjusted to match
changes in a price index. Capital indexed bonds are domestic bonds with quarterly coupons and face value indexed in line with inflation.
e. The
staff notes that the lowest credit quality rating is BBB-.
i.
Please
disclose in Item 4 that lower rated bonds have speculative characteristics.
The
Registrant intends to add the following disclosure to “Credit Risk” for clarity (additions in bold/underline):
Credit
Risk. Debt issuers and other counterparties may be unable or unwilling to make timely interest and/or principal payments when due or
otherwise honor their obligations. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness
may also adversely affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on an issuer’s
or counterparty’s financial condition and on the terms of an obligation.
-3-
Credit
risk is greater for lower-rated securities. Those bonds rated Baa3/BBB-/BBB-, while considered to be “investment grade,”
may have speculative characteristics. Because the issuers of lower rated investment grade bonds may be in uncertain financial health,
the prices of their debt securities could be more vulnerable to bad economic news, or even the expectation of bad news, than higher rated
investment-grade debt securities. Credit ratings may not be an accurate assessment of credit risk.
ii. Please
disclose in Item 9 how the Fund will handle potential downgrading of the bonds within its portfolio.
The
Registrant intends to add the following disclosure to Item 9 in response to this comment:
Credit
Ratings and Credit Downgrades. As the investment objective of the Fund is to track the performance of the Index, which includes credit
ratings eligibility criteria as part of its index methodology, the Fund may purchase any security within the Index, such security having
been determined by the Index Provider as meeting its credit ratings eligibility criteria. The Fund may invest, directly or indirectly,
in securities that are not rated by a rating agency or securities with a credit rating that differs from the credit rating specified
in the Index methodology in various circumstances, including where a security is downgraded but not yet removed from the Index, following
the removal of a security from the Index prior to its sale by the Fund or as a result of a corporate action or restructuring affecting
an issuer of a security held by the Fund. If, after purchase, the credit rating on a security is downgraded or the credit quality deteriorates,
or if the duration of a security is extended, BIM will decide whether the security should be held or sold. Upon the occurrence of certain
triggering events or defaults on a security held by the Fund, or if an obligor of such a security has difficulty meeting its obligations,
the Fund may obtain a new or restructured security or underlying assets. In that case, the Fund may become the holder of securities or
other assets that it could not purchase or might not otherwise hold (for example, because they are of lower quality or are subordinated
to other obligations of the issuer) at a time when those assets may be difficult to sell or can be sold only at a loss. In addition,
the Fund may incur expenses in an effort to protect the Fund’s interest in securities experiencing these events.
f. Please
clarify in plain English the meaning of “country-specific minimum issue size.”
The
Fund intends to revise the above-mentioned disclosure as follows in response to the staff’s comment (additions in bold/underline):
(iii)
meet a country-specific minimum issue size (i.e., a country-specific minimum par amount outstanding in order for the security to
be included in the Index), depending on . . .
-4-
g. With
respect to index criteria (v):
i. Please
state the maturity requirements in plain English and revise the risks accordingly.
The
Fund intends to revise the above-mentioned disclosure as follows in response to the staff’s comment (additions in bold/underline;
deletions in strikethrough):
and
(v) have at least one year to maturity as of the rebalancing date.until final maturity . . .
ii. Please
clarify whether the Fund has a duration policy. The staff notes “Duration Risk”
included in Item 4.
The
Fund has not adopted a duration policy. However, as the Fund invests primarily in fixed-income securities, the Fund is subject to duration
risk and interest rate risk.
7. The
Fund’s name includes the term “global.”
a.
Please
expressly describe how the Fund will “invest [its] assets in investments that are tied
economically to a number of countries throughout the world.” See Investment Company
Names, Investment Company Act Release No. 24828, at n. 42 (Jan. 17, 2001). For example, the
Fund could include a policy that, under normal market conditions, it will invest significantly
(e.g., at least 40% of its assets, unless market conditions are not deemed favorable, in
which case the Fund would invest at least 30% of its assets) in companies organized or located
in multiple countries outside the United States or doing a substantial amount of business
in multiple countries outside the United States.
The
Registrant respectfully notes that the Index consists of securities issued by nine sovereign countries, including the United States,
and therefore will at all times meet the definition of a “global” fund.
b. Please
indicate in Item 9 the Fund’s economic tie test as it relates to the Fund’s “global”
component.
The
Registrant respectfully notes that there is no relevant economic tie test as the securities are bonds issued by the sovereign governments
of the Eligible Countries.
8. Please
define “inflation-linked bond” and provide some examples, including examples
of non-U.S. inflation-linked bond.
See
response to Comment #5.
-5-
9. Please
relocate the first sentence of the third paragraph under “Principal Investment Strategies”
to the Item 4 risk section. See General Instruction C.3.a of Form N-1A.
The
Registrant intends to move the above-mentioned disclosure to “Index-Related Risk.”
10. The
fifth paragraph under “Principal Investment Strategies” states: “Under
normal circumstances, the Fund invests at least 80% of its net assets (plus the amount of
borrowings for investment purposes) in securities comprising the Index and in securities
that BIM determines have economic characteristics that are substantially identi