Australian fund manager BetaShares has launched the BetaShares Interest Rate Hedged Australian Investment Grade Corporate Bond ETF (HCRD), which it claims is the first of its kind in Australia.
The fund allows investors seeking exposure to Australian corporate bonds to hedge their interest rate risk. This is an important consideration, given forecasts for continued interest rate increases from the RBA over the coming months, BetaShares said in a media release announcing the launch of the fund.
HCRD offers exposure to long-term investment-grade bonds from various corporate issuers from different industries. It seeks to provide investors with an attractive monthly income that is expected to exceed income paid on cash, term deposits, and senior floating rate notes.
The hedging strategy contained in HCRD aims to reduce the volatility and capital variability of the bond portfolio. It uses bond futures contracts to minimise interest rate risk substantially, as movements in government bond yields are typically the largest contributor to the volatility of fixed-rate corporate bonds. HCRD retains full exposure to the credit component of the portfolio as a primary source of return.