Two new single-bond exchange-traded funds (ETF) have been listed that will aim to provide access to Australian corporate bonds through a listed structure and fill a gap in the fixed income market.
The bonds, offered by Income Asset Management (IAM), will provide exposure to the interest returns and capital preservation of bank subordinated debt from Westpac and Commonwealth Bank of Australia (CBA).
IAM director Danielle Press explained the new products shifted access to corporate bonds from wholesale investors to a wider audience via a listing, adding their release was a response to demand for single- bond ETFs.
“With single-bond ETFs we are catering to the growing appetite from Australian investors for fixed income products that have lower volatility compared with equities and a greater level of income than cash and term deposits,” Press said.
“Early indications suggest the product will attract strong demand from investors who have been denied access to direct bonds in the past.
“With the hybrid market to be phased out, this is a prime opportunity for investors to still access predictable income with minimal risk of capital loss.”
She pointed out each bond ETF offered the investor different characteristics, noting the Westpac bond had a long issue date, maturing in 2038, and a fixed to floating rate, while the CBA bond was a floating-rate bond.
The single-bond ETFs will be listed on Cboe Australia and will allow investors to construct their own portfolios based on the underlying bond exposures of interest.
IAM told smstrusteenews it plans to release more single-bond ETFs, dependent on demand, but is looking to introduce at least 10 to 20 new funds to ensure investors can diversify across issuers and maturity dates, along with a mix of fixed and floating-rate bonds.
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