Betashares has launched an exchange-traded fund (ETF) granting access to investment-grade subordinated bonds issued by the country’s four largest banks.
The Betashares Australian Major Bank Subordinated Debt ETF (ASX code: BSUB) will track Australian dollar-denominated floating-rate bonds issued by ANZ, CBA, NAB and Westpac.
According to Betashares, the ETF marks Australia’s first pure-play tier 2 bank credit fund, exclusively featuring bonds worth at least $500 million and with up to 10 years remaining until maturity.
The ETF provider said BSUB would attract investors seeking diversification, as tier 2 floating-rate bonds have historically exhibited minimal correlation with equities and demonstrated stability in capital value.
“We’re excited to launch BSUB as we continue to broaden the range of investment options available to Australian investors and their financial advisers,” Betashares chief executive Alex Vynokur said.
“BSUB offers investors attractive monthly income, a high degree of capital stability, along with potential portfolio diversification benefits due to tier 2 floating-rate bonds historically exhibiting a low correlation to equities.”
Additionally, the income from these bonds fluctuates in line with a benchmark interest rate, increasing with rate hikes and falling with rate decreases, providing some protection from changes in interest rates.
The introduction of BSUB broadens Betashares’ line-up of cash and fixed income ETFs to 19 products, with a total of $10.5 billion in funds under management in this asset class.
In the past year, Betashares has attracted $2.5 billion in net flows to cash and fixed income ETFs, the highest among Australian ETF issuers.