Global X has launched its newest exchange-traded fund (ETF), offering investors a cost-effective way to generate attractive yield from Australian banks.
The Global X Australian Bank Credit ETF (BANK) will be available in late July 2024, the firm announced, providing exposure to credit in the Australian banking sector and tracking the Solactive Australian Bank Credit Index’s performance.
The ETF provider described the investment product as Australia’s first “three-in-one” passively managed package of senior bonds, subordinated bonds and hybrid securities.
With fixed income ETFs capturing 43 per cent of net flows in 2023, Global X chief executive Evan Metcalf reflected on their noteworthy expansion.
“Fixed income ETFs have experienced a remarkable period of growth in Australia over the past year. The largest portion of these flows have been directed towards widely diversified solutions and ETFs focusing on floating rate notes, such as subordinated debt,” he said.
The trend demonstrates the widespread impact that rising interest rates have had on local investor sentiment, Metcalf added, sparking an increased desire to reduce the duration of portfolios and seek out appealing yields.
“With a growing appetite for more short-term fixed income ETFs in the Australian market, our ambition for BANK is to take advantage of this untapped potential, as we aim to target a duration of one to two years and a yield of 5–7 per cent.”
According to Marc Jocum, product and investment strategist at Global X, the solution was constructed for investors seeking consistent income, capital preservation and increased portfolio resilience.
“Set at a competitive annual management fee of 0.25 per cent, [the ETF] combines stability, regular income and the familiarity of hybrid securities, which have historically been popular with financial advisers and their clients thanks to their quarterly income and franking credits,” Jocum said.
The new product marks Global X’s 40th listed ETF, with the firm currently having over $7.5 billion in assets under management.
Just last week, the firm launched a currency hedged version of its FANG+ ETF investing in next-generation technology. It gives exposure to 10 technology companies, providing innovation across the technology space, including the Magnificent Seven stocks of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.
The fund aims to provide investors with a return that (before fees and expenses) tracks the performance of the NYSE® FANG+™ Index (AUD Hedged), with a competitive management fee of 0.38 per cent per annum. The original FANG+ ETF was launched back in 2020 and currently has $645 million in net assets.
