Exchange-traded fund (ETF) provider Betashares has launched an institutional-grade credit income investment vehicle called the Betashares Australian Enhanced Credit Income Complex ETF.
The new ETF, trading under the Australian Securities Exchange (ASX) ticker ECRD, is actively managed and invests in a portfolio of floating-rate subordinated bonds issued by Australia’s big four banks and interest rate-hedged Australian investment-grade corporate bonds.
It provides access to these asset classes via the Betashares Australian Major Bank Subordinated Debt ETF (ASX: BSUB) and Betashares Interest Rate Hedged Australian Investment Grade Corporate Bond ETF (ASX: HCRD).
Yields are enhanced through gearing at institutional borrowing rates, with the manager stating the strategy currently provides a running yield of 7.68 per cent a year, which is paid monthly.
As such, it seeks to provide investors with a higher level of income than traditional bond funds and hybrids.
“Against a backdrop of bank hybrids being phased out and dividend yields on shares trending lower, ECRD offers a timely and compelling addition to our range of income solutions,” Betashares chief executive Alex Vynokur explained.
“By combining high-quality Australian investment-grade bonds that have exhibited attractive risk-adjusted returns with a structure that enhances income potential, we’re giving investors the opportunity to boost income without taking on equity risk.”
According to Betashares, cash and fixed-income ETFs have been popular this year with inflows into the sector almost reaching $11 billion, which is higher than the $6.4 billion received last year.
“Our growing range of robust fixed-income solutions continues to help investors build stronger portfolios and meet their income goals,” Vynokur said.
The manager recently exceeded $15 billion in funds under management in cash and fixed-income ETFs and continues to prioritise access to institutional-grade cash and fixed-income investment solutions for Australian investors and their financial advisers.
