Investment manager iShares has released two new fixed income exchange-traded funds (ETF) into the market aimed at providing investors access to high-quality Australian investment-grade corporate bonds in a cost-effective manner.
The iShares Yield Plus ETF has been designed to generate a return of 0.75 to 1.0 per cent yield margin over the Reserve Bank of Australia cash rate while providing investors with an element of capital preservation. The underlying portfolio consists of a variety of diversified securities and is looking to deliver individuals greater diversification through the exclusion of instruments issued by Australia’s major banks.
Distributions from the ETF are paid monthly and daily liquidity is incorporated, with iShares charging investors a yearly management fee of 0.12 per cent.
The iShares Core Corporate Bond ETF offers individuals access to a diversified portfolio of high-quality Australian corporate bonds. It has been designed to provide a reliable income stream for investors who prioritise products with low fees.
It is benchmarked to the Bloomberg AusBond Credit 0+ Yr Index and includes a 0.15 per cent annual management fee.
Both ETFs comprise an environmental, social and governance element, with the respective portfolios being constructed without securities from corporations associated with controversial weapons, civilian firearms, fossil fuels, tobacco and United Nations compact violators.
According to iShares head of Australasia Christian Obrist, the two ETFs have been launched to satisfy consumer preferences during periods of high market volatility.
“During periods of heightened market volatility, we have seen Australian investors deepen their usage of fixed income ETFs as key building blocks to construct resilient portfolios, whether it is for income generation, capital preservation or as diversification from equities,” Obrist said.
“We’re excited to add iShares Yield Plus ETF and iShares Core Corporate Bond ETF to our existing fixed income ETF suite, particularly in the current backdrop of ultra-low interest rates and reduced equity dividends.
“We believe investors are set to benefit from the broadening of cost-effective, liquid investment choices in our ETF product range as the two funds aim to meet investors’ demand for diversified sources of income.”
Recent Australian Securities Exchange data showed investors’ use of ETFs has increased during the coronavirus pandemic.