VanEck has announced that it is “in the final stages of preparations” to launch a new exchange traded fund (ETF) on the Australian Securities Exchange (ASX), the VanEck Vectors Australian Floating Rate ETF, which will offer the strategy for retirees and self-managed superannuation funds (SMSFs).
According to VanEck, the new fund, which would trade under ‘FLOT’ trading code and would seek a defensive source of income with a higher yield than cash investments, would offer investors exposure to a diversified portfolio of Australian floating rate notes (FRNs) and would track the market benchmark for Australian FRNs, the Bloomberg AusBond Credit FRN 0+ Yr Index.
VanEck Australia’s managing director, Arian Neiron, said this strategy may attract interest from investors such as retirees and SMSFs who wished to preserve their capital but diversify out of very low yielding deposits.
“Concerns about rising interest rates have prompted many investors to consider moving out of longer-term bonds where duration risk, or the risk that bond prices will fall if interest rates rise, is greater,” he said.
“In contrast, returns on FRN coupons are designed to rise with short-term interest rates, which will benefit investors, while their capital stays relatively intact.
“We expect to see strong demand for this ETF, which will give broad exposure to investment grade quality short-terms bonds for a very low management cost.”
