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Bank hybrids ETF launched

betashares hybrid etf

Following the strong growth of its active hybrid ETF, BetaShares has launched a passive fund focused on hybrid securities issued by major banks.

BetaShares has introduced to the market its second new fund offering since the start of the year with the release of an exchange-traded fund (ETF) based on listed hybrid securities issued by the big four Australian banks.

The BetaShares Australian Major Bank Hybrids Index ETF, which carries the Australian Securities Exchange (ASX) code BHYB, will track the performance of a diversified index of hybrids issued by the four largest Australian banks, with a total management cost of only 0.35 per cent a year.

The fund manager said to be eligible for inclusion in the index the ETF will track, a hybrid security must be a listed preference share having a market capitalisation of at least $100 million, and since the focus will be on major banks, the underlying securities are all currently rated at least investment grade.

It noted hybrid securities offered franked income returns with typically moderate levels of capital volatility and a relatively low correlation to equities, and produced risk and return characteristics above fixed income securities but below ordinary shares.

BetaShares chief executive Alex Vynokur said the new ETF addressed the issue of low interest rates reducing income levels for investors.

“Our new ETF offers attractive income, but only holds hybrids backed by our ‘Big 4’ banks, which are among the most profitable and prudentially sound banks in the world,” Vynokur noted.

“BHYB offers investors who understand the features and risks of hybrids a convenient, cost-effective way to access this unique asset class.”

He added the fund provided a passive complement to BetaShares’ Active Australian Hybrids Fund, which recently reached $1 billion in funds under management.

“The growth of the Active Australian Hybrids Fund has demonstrated that there is strong demand for exchange-traded funds which provide access to the hybrids market,” he said.

“We have additionally heard from our investors that there is demand for a passive exposure to the hybrids market, which we are now proud to deliver with BHYB.”

The ETF is now available on the ASX and is the second new ETF launched by Betashares in 2021 after it unveiled a cloud-computing ETF in February.

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