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ETFs, Investments

Global X to release bank credit ETF

ETF Bank credit Global X Marc Jocum Evan Metcalf

Global X will launch Australia's first ETF that combines senior bonds, subordinated bonds and hybrid securities.

Global X will launch a new fixed-income exchange-traded fund (ETF) in late July, providing investors with an opportunity to earn yield from Australia’s top banks.

The Global X Australian Bank Credit ETF (ASX: BANK) will track the Solactive Australian Bank Credit Index. According to the ETF provider, it is the first exchange-traded product in Australia to combine senior bonds, subordinated bonds and hybrid securities in one package.

Global X product and investment strategist Marc Jocum highlighted the fund’s benefits for investors looking for steady income and capital preservation.

“Our first-of-its-kind product offers attractive yields and convenient portfolio diversification. Set at a competitive annual management fee of 0.25 per cent, it combines stability, regular income and the familiarity of hybrid securities, which have historically been popular with financial advisers and their clients thanks to their quarterly income and franking credits,” Jocum said.

The launch of BANK comes at a time when fixed-income ETFs are seeing substantial growth. In 2023, fixed-income ETFs attracted 43 per cent of net flows, totalling $6.5 billion, the highest on record for a 12-month period.

Global X chief executive Evan Metcalf commented on this trend, stating: “Fixed-income ETFs have experienced a remarkable period of growth in Australia over the past year. The largest portion of these flows have been directed towards widely diversified solutions and ETFs focusing on floating-rate notes, such as subordinated debt.

“This trend has shown the widespread impact rising interest rates have had on local investor sentiment, sparking an increased desire to reduce the duration of portfolios and seek out appealing yields.

“With a growing appetite for more short-term fixed-income ETFs in the Australian market, our ambition for BANK is to take advantage of this untapped potential as we aim to target a duration of one to two years and a yield of 5 to 7 per cent.”

BANK will be the fortieth ETF listed by Global X, following the recent release of a currency-hedged FANG+ fund.

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