BetaShares has expanded the number of fixed income exchange-traded funds (ETF) it offers with a new fund that provides exposure to bonds issued by Australian state and federal governments.
The BetaShares Australian Government Bond ETF is the fifth fixed income and cash vehicle launched by the company and will carry the Australian Securities Exchange (ASX) code AGVT.
While the fund will primarily track the performance of the government bonds index, it will also include a component of bonds issued by supranationals, sovereign agencies and similar organisations.
In announcing the release, BetaShares stated the AGVT index had outperformed comparable indices on a total return basis by 1.6 per cent a year over the past 10 years.
BetaShares chief executive Alex Vynokur said the fund was the first of its kind for the company and fixed income ETFs were receiving increasing attention from investors in Australia and overseas.
“Government bonds are a core part of a balanced portfolio given their historical negative correlation to equities and high level of stability relative to corporate bonds,” Vynokur said.
According to the ETF provider’s monthly review of the sector, fixed income ETFs registered net flows of $1.16 billion in the first five months of the year, which was level with the international equities category of ETFs.
“We’re seeing a significant level of interest in our fixed income range as investors become increasingly wary of the late-cycle bull market in equities,” Vynokur said.
“The strong flows in the fixed income category have also been assisted by the growth in investment options now available on the ASX, which we expect to continue to develop as the market matures and investors increase their portfolio allocations to bonds.”
In related news, the Australian ETF market grew to $50 billion in assets under management during the second quarter of this year.
Drawing on figures from the ASX, ETF provider Vanguard stated the ETF market grew by $10 billion in the first half of 2019, driven by “strong market returns and robust cash flows”.
Vanguard also noted the growth in fixed income ETFs, saying investors moved to more defensive products in the second quarter of the year.
As a result of this shift, cash flows into domestic fixed income were higher than flows into Australian and international shares, and over the quarter, Australian fixed income flows represented 36.5 per cent of overall flows, or $1.02 billion.
