SMSF trustees are showing greater understanding of and interest in the global bonds space, particularly for direct investment, according to fixed income specialist FIIG Securities.
“With international bonds, there’s a growing awareness to invest in other countries and get exposure to other currencies, and access a very broad range of companies with a broad range of yields,” FIIG director of education and research Elizabeth Moran told selfmanagedsuper.
“If investors aren’t comfortable investing in a foreign company, they can still invest in an Australian company because they issue bonds in a foreign currency.
“SMSFs have absolutely recognised the opportunity, some of our clients holding 30 per cent to 40 per cent in their portfolios – the liquidity and the size of the bond issues and the companies are massive, and the number of investors, it’s a very big global market.”
Moran added many SMSF trustees had lived and worked overseas and so already had accounts in foreign currencies.
FIIG’s SMSF clients were typically holding $1 million or more in their fund as the specialist manager had a $250,000 minimum, she said.
“We do have some with smaller balances, it’s just that they like the certainty of the asset class combined with a mindset of preserving capital,” she revealed.
“You don’t necessarily get big swings in bond prices, but you get a consistent asset class that is suitable for SMSFs as they’re approaching retirement – it’s going to deliver the consistent income that they’re looking for.”
Moran’s comments come as FIIG last week announced the opening of its first offshore subsidiary following substantial local growth and demand for international fixed income and high-yield investments.
The European subsidiary is based in Malta, allowing the manager to operate its business in all 28 European Union member nations.
“We’ve had a positive response already and this will open up the opportunities to invest in much bigger, broader markets for SMSFs,” Moran said.
“Over time, we expect to also further develop the Australian high-yield market and bring more opportunities to Australian investors.”
FIIG has originated 45 Australian-dollar-denominated corporate bond issues on behalf of mid-cap Australian companies, typically at sizes of $40 million to $50 million with five-year structures.
This represents around $1.8 billion of debt capital for these businesses that was previously unavailable.