A slew of new fixed income ETFs will soon be available to the Australian market following recent regulatory changes.
Both BlackRock Investment Management and Russell Investments have announced plans to launch fixed income electronically traded funds (ETFs), the demand for which will be closely watched by rival asset management firms and advisers alike.
For financial planners it also offers the opportunity to circumvent platforms and still offer clients a diverse portfolio tailored to their needs.
BlackRock said its iShares business is planning to launch three new Australian fixed income ETFs on the Australian Securities Exchange (ASX).
Once launched, the iShares fixed income ETFs will track the popular UBS fixed income indices.
The new fixed income ETFs will be: iShares UBS Composite Bond Index Fund, which will invest in investment grade securities; iShares UBS Treasury Index Fund, which will invest in Australian Commonwealth Government bonds; and iShares UBS Government Inflation Index Fund, which will invest in both Australian Commonwealth Government and Australian State Government bonds.
“iShares looks forward to launching our first Australian fixed income ETFs on the ASX, providing investors with easy access to this important asset class,” said Mark Oliver, managing director of iShares Australia.
“This launch represents the long-awaited democratisation of Australia’s fixed income markets and marks a significant stage in the evolution of Australia’s ETF industry.”
Meanwhile, Russell Investments is set to launch three bond ETFs: the Russell Australian Government Bond ETF, the Russell Australian Semi-Government Bond ETF and Russell Australian Select Corporate Bond ETF.
The new ETFs will add to Russell’s suite of Australian ETFs, which include the Russell High Dividend Australian shares ETF and the Russell Australian Value ETF.
“Backed by custom-built indexes, these bond ETFs will satisfy a unique need in an investors’ multi-asset portfolio,” said Chris Corneil, CEO of Russell Investments Australasia.
“Fixed income is a crucial part of a well-constructed, multi-asset portfolio, particularly in the current environment, and investors now have another tool to access this asset class in an easy and low cost way.”
Amanda Skelly, director of ETFs at Russell Investments, said she expects the ETFs to be particularly popular with SMSFs, advisers and brokers who up until now have not had an easy way to access bonds.
In the benchmark study of the SMSF sector, Intimate with Self Managed Superannuation, recently commissioned by Russell and SPAA, SMSF advisers said the top two areas they provide advice on were bonds and fixed interest investments (76.8 per cent) and cash products term including deposits (72.9 per cent).
“We think advisers will really be able to add value to their clients’ portfolios by advising them on how to effectively use bond ETFs, and we intend to focus on education of how bond ETFs work and they can be used in a portfolio,” said Skelly.
“Many retail investors are interested in exploring options to access fixed income other than term deposits, hybrids or managed funds and we believe bond ETFs will be a great complement to these.”
Russell’s bond ETFs will be listed for trading on the Australian Stock Exchange on Tuesday March 13, 2012.
