Investors who wish to diversify their investment portfolio beyond their traditional holdings of US stocks and fixed income securities may wish to consider the Australian Bond Exchange Traded Fund (ETF) to effectively obtain fixed income from government, government agency and corporate debt Securities exposure to Australian companies. The following high-yield Australian bond ETFs are worthy of careful study.
- Investors seeking to increase fixed income exposure in their investment portfolios should consider the Australian Bond Exchange Traded Fund (ETF).
- The two Marquis funds today are the SPDR S&P/ASX Australian Bond ETF (BOND.AX) provided by State Street Global Advisors and the iShares Core Composite Bond ETF (IAF) provided by BlackRock.
- In recent years, Australian corporate bond ETFs have been on the rise, accounting for 17% of the overall Australian ETF market.
SPDR S&P/ASX Australian Bond Fund
The SPDR S&P/ASX Australian Bond ETF (BOND.AX) was issued by State Street Global Investment Advisors on July 26, 2012. The fund does not charge an annual expense ratio and is managed by State Street Global Advisors Australia Limited. The fund aims to provide returns corresponding to the S&P/ASX Australia Fixed Rate Index, which is the fund’s benchmark index.
The fund has the following sectoral breakdowns in its exposure profile:
- Commonwealth Government Bonds (54.14%)
- Semi-government bonds (27.37%)
- Supranational bonds (5.37%)
- Government-related bonds: (4.78%)
- Corporate financial bonds (4.96%)
- Corporate industry bonds (2.23%)
- Other (0.78%)
- Corporate public utility bonds (0.38%)
As of April 19, 2020, the fund’s year-to-date total return rate was 3.35%. The average maturity of its underlying investment is 6.95 years, and its current assets under management are A$45.82 million.
iShares Core Composite Bond ETF
The iShares Core Composite Bond ETF (IAF) was issued by BlackRock Inc. (BLK) on March 14, 2012. The fund aims to track the performance of the Bloomberg AusBond Composite Index, which is the fund’s underlying index.
To achieve its investment objectives, the ETF mainly holds investment-grade fixed income securities issued by the Australian government and companies registered in Australia. Investment in this fund requires an annual management fee of 0.15%.
As of November 11, 2019, the fund held 511 stocks with total net assets of A$1.1 billion.The total return of the fund year-to-date is 2.57%.The average duration of its related investments is 7 to 10 years, of which 28.52% of funds are dedicated to such investments. This is followed by 3-5 year bonds (16.98%), 5-7 year bonds (13.88%) and 10-15 year bonds (10.05%).
General Australian bond ETF growth
As a broad asset class, the Australian corporate bond ETF has experienced an undeniable surge in the past five years. During this period, these investments soared by an average of 51% each year, and total assets reached approximately A$13.3 billion, accounting for approximately 17% of the overall Australian ETF market. Many analysts expect this upward trend to continue.
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