ETFs, Fixed Income

Addition to BetaShares fixed income suite

ETF fixed income

BetaShares has launched a fixed income ETF that uses an underlying index aimed at avoiding the flaws of traditional debt-weighted indices.

Specialist exchange-traded fund (ETF) manager BetaShares has added to its offerings covering the fixed income market with the release of its Australian Composite Bond ETF on the Australian Securities Exchange (ASX).

Trading under the ASX ticker of OZBD, the new fund will track the Bloomberg Australian Enhanced Yield Composite Bond Index before fees and expenses.

The ETF will see bonds held in its portfolio weighted on the basis of their risk-adjusted income potential rather than debt weighting. This methodology is expected to generate better returns for investors compared to products using the popular AusBond Composite Index. In addition, OZBD will aim to maintain an overall duration and credit profile similar to the AusBond Composite Index.

BetaShares chief executive Alex Vynokur described the new ETF as providing a cost-effective and convenient way to invest in a portfolio made up of government and high-quality Australian corporate bonds.

“OZBD has been designed to be a core portfolio allocation for fixed income for Australian investors and their advisers. OZBD’s intelligent investment approach seeks to avoid the shortcomings of traditional debt-weighted indices and aims to provide higher returns,” Vynokur said.

“The fund’s focus on income is particularly pertinent in a rising yield environment.”

According to BetaShares, the Bloomberg Australian Enhanced Yield Composite Bond Index has outperformed the AusBond Composite Index in each of the past 10 years, as well as over the long term.

Further, as at 31 January 2021, the OZBD index was offering a yield-to-maturity that was 0.64 per cent higher when compared to the AusBond Composite Index.

OZBD is the eighth offering from BetaShares in the fixed income space.

Last week, the ETF provider launched a thematic product targeting the online retail and e-commerce sectors, which have performed well as a result of changed consumer spending practices stemming from the COVID-19 pandemic.

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