The Australian Securities Exchange (ASX) has assigned an official debt securities rating service to a credit ratings house in a move that will help SMSF investors gain a better insight into the fixed income asset class.
The ASX assigned the task of awarding ratings to all debt and hybrid securities it trades to Australia Ratings.
“We hope self-managed super funds will see us as a useful source of information on these products,” Australia Ratings managing director Chris Dalton said.
Under the agreement, Australia Ratings will not only rate debt and hybrid securities, including fixed income managed funds listed on the ASX mFund Settlement Service, but will also provide a product complexity indicator to assist investors with gauging associated risk levels.
Dalton said the complexity indicator had been developed in a similar way to the fire danger warning system.
“If it’s a relatively simple fixed income product, it will be designated as green and then you’ve got your spectrum of complexity going down to red,” he said.
He used the example of a subordinated debt issue as a security that would attract a green complexity indicator.
Conversely, a listed fixed income product that incorporated a non-viability characteristic, where in certain circumstances the debt security could be converted to equity subject to Australian Prudential Regulation Authority approval, would reflect a red complexity indicator, he said.
SMSF investors were likely to benefit from the fixed income ratings in light of changes to the Corporations Act allowing “simple corporate bonds to be issued in a streamlined fashion”, he said.
He said SMSFs would derive an even greater benefit once legislation came into effect allowing the ASX to transmute bonds originally issued to the wholesale market to retail market offerings via CHESS (Clearing House Electronic Sub-register System), which would result in a greater number of fixed income securities in which to invest.
SMSF advisers and trustees can download the ratings and product complexity indicators from the Australia Ratings website, www.australiaratings.com, free of charge.