Having read the tea leaves of nervous income-focused investors, concerned over the certainty of income with interest rates on the slide and hybrids coming to an end, ETF issuer Betashares has launched a range of fixed income ETFs with a twist.
What’s different about these ETFs is that they promise to deliver predictable monthly income with a defined maturity date.
Betashares Defined Income Bond ETFs are targeted at a growing cohort of investors seeking greater predictability in cash flow and capital return.
It’s understood that the new fund combines the traditional features of a single bond held to maturity – including regular payments and a set end date – with the diversification, flexibility, liquidity, and transparency benefits of an ETF structure.
Investment grade corporate bonds
Each ETF in the Defined Income Range holds a diversified portfolio of investment-grade Australian corporate bonds which mature in the 12 months leading up to a specific date (e.g. May 2028, 2029 or 2030).
Investors can expect targeted monthly income payments until the Fund’s maturity date.
Once the fund matures, investors receive the value of their units, mirroring the experience of holding an individual bond to maturity.
Buy/sell any time
Like any ASX-listed entity, investors have the flexibility to buy or sell their Defined Income Range ETF at any time prior to maturity.
Widely adopted by investors in the U.S. and elsewhere, Defined Income Range ETFs are often used as an alternative or adjunct to term deposits and fixed term annuities that let investors boost income without locking up capital.
Here in Australia these funds are expected to progressively attract [fixed income] investor attention as cash rates move lower.
Greater predictability
Betashares CEO, Mr Alex Vynokur expects these funds to specifically attract investors wanting to A) boost their income, and B) get greater predictability over capital return at maturity date.
“Australian investors are known for their love of higher income yields from their portfolio, and our new range of Defined Income ETFs will assist with this goal,” Vynokur said.
“ETFs offer access to opportunities once the domain of large institutions. Our Defined Income ETFs further this goal by providing investors with predictable, compelling income as well as the liquidity, transparency, and diversification benefits of an ETF.”
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
