Betashares has expanded its fixed income solutions with the launch of a new bond exchange-traded fund (ETF).
The Betashares Australian Major Bank Subordinated Debt ETF offers investors exposure to a portfolio of high-quality tier 2 floating rate subordinated bonds issued by Australia’s big four banks.
The bonds must have amounts outstanding of at least $500 million and a remaining maximum term to maturity of 10 years to be eligible for inclusion in the fund.
According to the ETF provider, Australian banks are widely considered some of the best capitalised major financial institutions across the globe and are the foundational pillars of the country’s banking system.
Tier 2 floating rate subordinated bonds offer a high degree of capital stability and attractive income potential, Betashares stated, typically delivering returns above senior bank floating rate notes.
Moreover, the ETF provides investors with protection against rising interest rates, as the income paid by such bonds varies in line with benchmark interest rates.
Commenting on the fund launch, Betashares CEO Alex Vynokur said: “We’re excited to launch [the ETF] as we continue to broaden the range of investment options available to Australian investors and their financial advisers.
“[The fund] offers investors attractive monthly income, a high degree of capital stability, along with potential portfolio diversification benefits due to tier 2 floating rate bonds historically exhibiting a low correlation to equities.”
Betashares currently has $10.5 billion in funds under management in the cash and fixed income asset class. Over the past 12 months, the fund manager has received $2.5 billion in net flows to cash and fixed income ETFs from investors.
The new fund launch brings Betashares’ suite of cash and fixed income ETFs to a total of 19 investment solutions.
Last month, the firm also launched two ETFs which were Australia’s first “moderately geared” ETFs available on the ASX.
The Betashares Wealth Builder Australia 200 Geared (30–40% LVR) Complex ETF provides moderately geared exposure to the returns of the broad Australian sharemarket.
Meanwhile, the Betashares Wealth Builder Diversified All Growth Geared (30–40% LVR) Complex ETF offers moderately geared exposure to the returns of an “all-cap, all-world” share portfolio.
“The wealth builder series has been designed for investors who are comfortable with leverage but are seeking a more moderate level of gearing better suited to a ‘buy and hold’ investment strategy as part of their wealth-accumulation goals,” Vynokur said in April.
