Correspondence 0001829126-25-001008 from BondBloxx ETF Trust (CIK 0001879238)
BondBloxx ETF Trust (CIK 0001879238)
Date: Feb. 14, 2025 · CIK: 0001879238 · Accession: 0001829126-25-001008
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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
February 14, 2025
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: Anu Dubey
Re:
BondBloxx ETF Trust (the “Registrant”)
File Nos. 333-258986 and 811-23731
Dear
Ms. Dubey:
This
letter is being filed to respond to the telephonic comments received from you on January 14, 2025, regarding the staff of the Securities
and Exchange Commission’s (the “SEC”) review of Post-Effective Amendment No. 54 to the Registrant’s registration
statement on Form N-1A (the “Registration Statement”) filed with the SEC on December 6, 2024. 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 Post-Effective Amendment No. 59 to the Registration Statement, which the Registrant expects
to be filed on or about March 5, 2025. Capitalized terms not defined in this letter have the meanings assigned to them in the Registration
Statement.
*
* *
Prospectus
Cover
Page
1. Please
fill in the Fund’s ticker symbol, which is currently bracketed.
The
Registrant will make the requested change.
Fees
and Expenses
2. Please
provide the staff with a completed fee table and expense example.
Please
see Appendix A attached hereto.
3. The
staff notes disclosure related to investing in the securities of other registered investment
companies. Please consider if the Fund’s Annual Fund Operating Expenses table should
include a line item for Acquired Fund Fees and Expenses (“AFFE”). If the Fund
determines an AFFE line item is not required, please confirm supplementally to the staff
that to the extent the Fund has AFFE, AFFE is included in the “Other Expenses”
line item.
The
Registrant confirms that it has considered whether an AFFE line item is required based on the Fund’s estimated acquired fund fees
and expenses for the first year of operations and determined that this line item is not required. The Registrant additionally confirms
that the Fund’s AFFE are expected to be less than 0.01% and has therefore included such fees and expenses under the “Other
Expenses” line item.
Principal
Investment Strategies
4. Describe
in greater detail the types of derivatives the Fund will invest in as part of the Principal
Investment Strategies and the purposes of such investments. Also disclose corresponding risk
of derivatives in the Principal Risks.
The
Registrant notes that while the Fund does not intend to use derivatives to meet its 80% policy, it reserves the right to do so.
Additionally,
if Registrant determines to seek to meet its 80% policy indirectly, it may do so by investing in derivatives in another fund that invests
in the same securities as the Fund or by some other permissible means. The use of “e.g.” by the Registrant is meant to provide
investors with an example of how the Fund might seek to meet its 80% policy. If the Fund determined to seek to meet the 80% policy indirectly,
including through derivatives, Registrant would provide Item 4 risk disclosure relating to any such method of seeking to meet its 80%
policy. At present, the Registrant believes that its Item 4 disclosures adequately reflect its anticipated principal investment strategies
and corresponding risk.
5. The
third sentence of the third paragraph states: “The Fund may only invest in fixed income
investments that have a minimum of B3 by Moody’s Investors Services, Inc. (“Moody’s”)
or B- by S&P Global Ratings (“S&P”), or the equivalent by another NRSRO
or that are unrated but considered to be of equivalent quality by the Sub-Adviser.”
Please clarify to state whether ratings of B3 and B- are investment grade or not.
The
Registrant intends to revise the disclosure as follows:
The
Fund may only invest in fixed income investments that have a minimum of B3 by Moody’s Investors Services, Inc. (“Moody’s”)
or B- by S&P Global Ratings (“S&P”), or the equivalent by another NRSRO or that are unrated but considered to be
of equivalent quality by the Sub-Adviser. Fixed income investments with a rating below Baa3 by Moody’s or below BBB- by S&P
are below investment grade securities.
-2-
6. The
fifth paragraph states: “The Fund expects to invest up to 30% of its total assets in
U.S. dollar-denominated, investment-grade fixed income debt instruments issued by non-U.S.
domiciled issuers.”
a. The
Staff notes the “Sovereign Debt Obligations Risk” disclosure. If the above referenced
30% policy also applies to sovereign debt, please add a reference to sovereign debt.
The
Registrant notes the referenced 30% policy does not apply to sovereign debt and therefore respectfully declines to make the requested
change. The Registrant believes the sovereign debt obligations risk disclosure is appropriate and does not intend to add additional risk
disclosure or relocate the risk disclosure to the SAI.
b. Please
add a risk to the “Summary of Principal Risks” and “A Further Discussion
of Principal Risks” sections discussing foreign investment risk.
The
Registrant will move its “Non-U.S. Issuers Risk” from the “Further Discussion of Other Risks” section into the
“Summary of Principal Risks” and “A Further Discussion of Principal Risks” sections.
c. If
applicable, disclose that where all or a portion of the ETF’s underlying securities
trade in a market that is closed when the market in which the ETF shares are listed and trading
is open, there may be changes between the last quote from its closed foreign market and the
value of such securities during the ETF’s domestic trading day.
The
Registrant will revise “Market Trading Risk—Secondary Market Trading Risk” in Item 9 as follows:
Secondary
Market Trading Risk. Shares of the Fund may trade in the secondary market at times when the Fund does not accept orders to purchase
or redeem shares. At such times, shares may trade in the secondary market with more significant premiums or discounts than might be experienced
at times when the Fund accepts purchase and redemption orders. In stressed market conditions, the market for the Fund’s shares
may become less liquid in response to deteriorating liquidity in the markets for the Fund’s underlying portfolio holdings. These
factors, among others, may lead to the Fund’s shares trading at a premium or discount to their NAV and bid-ask spreads may widen.
If a shareholder purchases at a time when the market price of the Fund is at a premium to its NAV or sells at time when the market price
is at a discount to the NAV, the shareholder may sustain losses. See also “—Shares of the Fund May Trade at Prices Other
Than NAV.”
-3-
Secondary
market trading in Fund shares may be halted by a stock exchange because of market conditions or for other reasons. In addition, trading
in Fund shares on a stock exchange or in any market may be subject to trading halts caused by extraordinary market volatility pursuant
to “circuit breaker” rules on the stock exchange or market. Additionally, where all or portion of the Fund’s
underlying securities trade in a foreign market that is closed when the market in which the Fund’s Shares are listed is open for
trading, there may be changes between the last quote of the underlying securities’ value in the closed foreign market and the value
of such underlying securities during the Fund’s domestic trading day . . .
d. If
the Fund can invest in emerging markets as a principal strategy, please add reference to
the above referenced paragraph and disclose corresponding risks in the “Summary of
Principal Risks” and “A Further Discussion of Principal Risks” sections.
The
Registrant notes investing in emerging markets is not a principal strategy of the Fund and therefore respectfully declines to make the
requested changes.
7. The
fifth sentence of the sixth paragraph states “Although the Fund may invest in instruments
of any duration or maturity, the Fund normally will seek to maintain a weighted average portfolio
duration of between 3 and 5 years.” Please add a discussion explaining the concept
of duration – e.g., that duration is a measure of the price sensitivity of a debt security
or portfolio of debt securities, to relative changes in interest rates.
The
Registrant will revise the referenced disclosure as follows:
Although
the Fund may invest in instruments of any duration or maturity, the Fund normally will seek to maintain a weighted average portfolio
duration of between 3 and 5 years. Duration is a measure of the expected life of a fixed-income security that is used to
determine the sensitivity of a security’s price to changes in interest rates. The Fund’s dollar weighted average
portfolio duration, however, may be longer or shorter at any time or from time to time based on market conditions (including, among other
events or factors, lack of liquidity in the bond markets or periods of high volatility and reduced liquidity) in the Sub-Adviser’s
discretion. For example, the price of a security with a two-year duration would be expected to drop approximately 2% in response to a
1% increase in interest rates.
Summary
of Principal Risks
8. Please
consider whether CMBS risk factor should be enhanced to reflect current market conditions
in commercial mortgage markets.
-4-
The
Registrant will revise “Commercial Mortgage-Backed Securities Risk” in Item 9 as follows:
The
CMBS in which the Fund invests may be issued by entities, such as banks, mortgage lenders or other institutions. These entities are not
backed by the full faith and credit of the U.S. government, and there can be no assurance that the U.S. government would provide financial
support to its agencies or instrumentalities where it is not obligated to do so. CMBS depend on cash flows generated by underlying commercial
real-estate loans, receivables or other assets, and can be significantly affected by changes in interest rates, the availability of information
concerning the underlying assets and their structure, and the creditworthiness of the originators of the underlying assets.
Due
to the nature of the loans they represent, CMBS are subject to a greater degree of prepayment and extension risk than many other forms
of fixed-income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the
value of certain CMBS. Certain CMBS are issued in several classes with different levels of yield and credit protection. The Fund’s
investments in CMBS with several classes may be in the lower classes that have greater risks than the higher classes, including greater
interest rate, credit, prepayment and extension risks.
In
addition, the value of CMBS may be adversely affected by regulatory or tax changes. CMBS issued by non-agency issuers may offer higher
yields than those issued by government entities, but also may be subject to greater volatility than government issues. In the recent
past, the market for CMBS has experienced volatility and reduced liquidity. Following the COVID-19 pandemic, many employers shifted
to allow remote and hybrid work arrangements. The increase in remote working arrangements has led to increased national vacancy rates
for commercial office space. These increased vacancy rates may adversely impact the value of CMBS by leading to higher delinquency rates
for the owners of commercial office buildings.
9. In
the “Exchange-Traded Fund and Other Investment Company Risk” please insert “registered”
after “other” in the heading and in the text, to be consistent with the Fund’s
“Principal Investment Strategies” disclosure.
The
Registrant will make the requested changes.
Performance
Information
10. Please
note the appropriate broad-based index the Fund intends to use.
The
Fund intends to use the Bloomberg Municipal Bond Index as its broad-based index.
-5-
Portfolio
Managers
11.
Remove the disclosure noting that the Sub-Adviser’s portfolio management team is “comprised of the following individuals” given that the Fund has only one portfolio manager.
The
Registrant will revise the disclosure under “Portfolio Managers – Portfolio Management” in the Prospectus as follows:
Elya
Schwartzman (the “Portfolio Manager”) is responsible for overseeing the overall investment strategy of the
Fund. The Portfolio Manager Mr. Schwartzman has been a fixed income Portfolio Manager
portfolio manager of the Fund since the Fund’s inception.
The
Sub-Adviser’s portfolio management team, comprised of the following individuals (together with Elya Schwartzman, the “Portfolio
Managers”), performs the daily investment of the assets of the Fund:
The
Registrant will revise the disclosure under “Investment Advisory, Administrative and Distribution Services – Portfolio Manager”
in the Statement of Additional Information as follows:
Elya
Schwartzman (the “Portfolio Manager”) is responsible for overseeing the day-to-day overall
investment strategy of the Fund.
The
Sub-Adviser’s portfolio management team, comprised of the following individuals (together with Elya Schwartzman, the “Portfolio
Managers”), performs the daily investment of the assets of the Fund:
12. If
the Fund will take temporary defensive positions, disclose that, as well as the types of
defensive investments the Fund will invest in when doing so, and that Fund may not meet its
investment objective when doing so.
The
Registrant will make the requested changes.
More
Information About the Fund
13. Please
provide the disclosure required under Item 9(b)(1) of Form N-1A regarding principal strategies.
The
Registrant will make the requested changes.
Statement
of Additional Information
General
Description of the Trust and the Fund
-6-
14. Disclose
the date when the Trust was org