Investors show interest in corporate bonds
The number of the high net worth investors (HNWIs) invested in the Australian corporate bond market is expected to nearly double in the next 12 months, according to Deloitte Access Economics and FIIG Securities Corporate Bond Report.
The study found that 16 per cent of Australian high net worth individuals (HNWIs) are invested in direct corporate bonds, with 37 per cent of direct corporate bond holders expecting to re0invest and 15 per cent of non-investors planning on investing for the first time in the next year.
Also, the rise of engagement in the corporate bond market was driven by a number of factors for investors included good returns given risk profiles, according to 72 per cent, capital preservation (54 per cent) and a reliable income stream (73 per cent).
FIIG Securities’ managing director, Jim Stening, said: “Providing strong returns, a reliable income and historically outperforming shares during economic downturns, investors are beginning to tap into corporate bonds as a vital part of a well-balanced, diversified portfolio.”
According to the study, which examined more than 700 HNWIs with over $2 million in investible assets for the study, the average gross return of corporate bonds was 6.1 per cent in the 10 years to 2016, outperforming the Australian Securities Exchange (ASX) (4.3 per cent) and global share markets (5.5 per cent).
Of those who did not own corporate bonds, 70 per cent said they did not have sufficient understanding of the asset class to invest.
“While the size of Australia’s corporate bond market has grown rapidly during the past 10 years, it still remains significantly smaller than that of other developed economies and direct market participation by Australian investors is relatively low compared to other countries,” Stening added.
“However, the findings show that Australian investors are beginning to catch up with our global counterparts when it comes to realising the benefits of corporate bonds and a genuinely balanced portfolio.”
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