BetaShares has responded to the introduction of Australian fixed income exchange-traded funds (ETFs) by announcing a cash ETF that it says will compete with term deposit rates.
Available on the Australian Securities Exchange from last Wednesday, the cash ETF was offering an initial variable rate of around 5.2 per cent, which BetaShares head of investment strategy Drew Corbett said is designed to exceed the 30-day bank bill rate.
The ETF holds Australian dollars on deposit with Australia's big four banks, with Westpac the primary holder at this stage, he said. Interest is accrued daily and distributions are paid monthly, he added.
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One of the EFT's key differences to other cash and fixed income products in the market is that it has the flexibility of an at-call bank deposit account but with rates closer to term deposit rates - without, however, the lockup period or early withdrawal fees, Corbett said.
Fixed income ETFs are also subject to fluctuations in bond prices if the Reserve Bank raises bond prices, he added.
For advisers who are using platforms the cash ETF is simple to buy on a platform but has a higher interest rate than they would normally achieve on a cash savings accounts on a wrap platform, which tends to offer rates more around the RBA rate on average, Corbett said.
He said clients were crying out for income products as they moved into the retirement phase, and were also placing a strong emphasis on capital preservation.