Demand climbs for Aussie dollar fixed income ETFs
AUSIEX analysis has discovered the demand for Australian dollar fixed income exchange-traded funds (ETFs) has considerably increased over the past four months.
According to the firm’s adviser trading data, the net traded value (buy value less sell value) of Australian dollar fixed income ETFs has more than doubled from January to April this year.
Similarly, inflows into global fixed income ETFs have also risen steadily from January onwards.
The overall sector produced inflows of $453.4 million during March, with Australian bond ETFs capturing $338.2 million of that amount. AUSIEX attributed this to ease of access compared to private credit and term deposits.
Meanwhile, bond markets suffered a weaker start to the year than expected. This was caused by stubborn inflation, posting losses and underperforming relative to global equities.
Bloomberg research shows that global bonds hedged to the Australian dollar lost 2 per cent and Australian bonds declined by 0.9 per cent in the four months to 30 April.
Current Australian dollar fixed income ETFs listed on the ASX include:
- iShares Core Composite Bond ETF
- Betashares Australian Bank Senior Floating Rate Bond ETF
- Vanguard Australian Fixed Interest Index ETF
- Russell Investments Australian Select Corporate Bond ETF
Recent insights from State Street’s The Outlook for ETFs in 2024 report also highlighted that fixed income ETFs made up one-third (34 per cent) of flows in 2023, which is expected to rise further in 2024.
“Old is new, if you will. Fixed income, one of the oldest asset classes out there, will drive the growth of ETFs in the next decade,” Tim Buckley, Vanguard chief executive, wrote in the report.
“The penetration of fixed income into the ETF structure has lagged way behind equities, it’s probably a decade behind. Equity penetration to ETFs is 50 per cent more than that of fixed income, so we expect that in the next decade for fixed income to close that gap and make it into ETF form and into client portfolios.”
AUTHOR
Jasmine Siljic
Recommended for you
International equity ETFs have recorded their third consecutive month with net inflows above $1 billion, according to Betashares, for advisers looking to capture this growth in client portfolios.
For advisers considering their clients’ fixed income allocations, VanEck research has detailed which elements of fixed income and credit have performed the best since the start of 2024.
There is a role for advisers to include capital securities in portfolios to provide diversification within clients’ fixed income allocations, according to fund manager Wellington Management.
BlackRock’s iShares fixed income ETFs have reached US$1 trillion in assets under management across the globe, a year after the global bond ETF industry hit US$2 trillion.
