Innovations in Swap Based ETFs: Beyond Just Leverage

Calamos Autocallable Income ETF

CAIE

-0.19%

CAIE is, in my view, one of the more innovative ETF launches in recent years. Since debuting in June 2025, the fund has grown quickly to about $693 million in assets under management, which speaks to investor interest in its structure.

Most of the portfolio is held in U.S. Treasury bills. Those Treasuries serve as collateral for a total return swap linked to the MERQUBE US Large Cap Vault Advantage Autocallable Index. Under the swap, CAIE pays a rate based on SOFR plus 10bps, to JPMorgan Chase as the counterparty.

This structure addresses several challenges that have historically limited access to autocallables. These instruments are structured products, typically available only through private placements, and they are operationally difficult to hold inside an ETF.

In-kind creation and redemption would be impractical, and a fully cash-based approach would be inefficient. Using a swap keeps the structure clean, scalable, and operationally viable.

The referenced index is a laddered composite of 61 live autocallable notes tied to U.S. large-cap equities. At present, all of those positions are paying coupons, with a weighted average coupon rate of 14.08%. None of the positions are currently near maturity with principal at risk

The laddered design matters. One of the primary risks with autocallables is timing risk, where outcomes depend heavily on when a note is issued and when it matures relative to market conditions. By spreading exposure across many notes with staggered start dates and maturities, the index reduces reliance on any single issuance.

That diversification helps smooth income, limit concentration in unfavorable market windows, and make the overall payoff profile more consistent over time. Distributions are also delivered in a more tax-efficient manner (largely return-of-capital) than holding individual structured notes directly.

Tortoise MLP ETF

TMLP

Before TMLP launched, investors effectively had two choices for accessing master limited partnerships through an ETF, each with clear trade-offs.

If you wanted pure-play MLP exposure above the 25% threshold, the ETF had to be structured as a corporation. That structure subjects the fund to a federal tax at the fund level. The result is persistent tax drag, which is why some pure-play MLP ETFs have shown sizable negative tracking error versus their benchmark indexes.

The workaround was to cap MLP exposure at 25% or less. Doing so allows the ETF to qualify as a regulated investment company (RIC) and remain a pass-through vehicle. The downside is that the portfolio is no longer a pure-play MLP strategy. Instead, much of the exposure shifts to midstream C-corporations, which reduces the income profile.

TMLP takes a different approach. The ETF remains a RIC but does not hold MLPs directly. Instead, it uses Treasury bills as collateral to enter into total return swaps linked to the proprietary Tortoise MLP index consisting of 20 midstream holdings.

The practical outcome is meaningful. Investors get exposure that closely resembles a traditional MLP portfolio, without the corporate-level tax drag, without deferred tax liability markdowns that can weigh on net asset value, and without receiving Schedule K-1s.

By avoiding both the corporate ETF structure and the 25% limitation, TMLP aims to deliver cleaner tracking to its benchmark and a more efficient way to access the MLP space.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.