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Active (5)BetaShares fixed income investment solutions
A simple, cost-effective way to build the fixed income component of your investment portfolio.
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Fixed income has long been acknowledged as a core component of a balanced portfolio, providing defensive characteristics and diversification benefits to investors.
However, compared to our global peers, Australians tend to have very low allocations to fixed income (particularly in superannuation), preferring to allocate funds to cash or term deposits.
In today’s low interest rate environment, investors have to look harder for the income they need. Fixed income can be a reliable and regular income generator, with less risk than shares, and fewer restrictions than term deposits.1
What is fixed income?
Fixed income covers several types of investment, including bonds and floating rate notes. All these products pay a regular income stream. Some pay a fixed rate of interest; others pay a floating rate. A fixed income investment can also provide a capital return (gain or loss), as its price is not fixed. Typically, however, the price of a fixed income investment will vary much less than the price of most shares.
Fixed vs. floating
A fixed rate investment pays a set rate of interest for the term of the investment. You know at the time you make the investment how much interest you will receive on each payment date.
In the case of bonds, the interest payments are referred to as ‘coupons’.
A floating rate investment pays a rate of interest that varies in line with a benchmark interest rate. As interest rates change, the interest you receive also changes.
Benefits of fixed income in a portfolio
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1
Regular and reliable income
Fixed income securities provide investors with a steady stream of income, often at lower levels of risk than other assets such as shares or property.
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2
Portfolio diversification
Fixed income can provide diversification for investors’ share portfolios – helping to reduce risk and provide a defensive shield during sharemarket declines.
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3
Relative capital stability
Assuming issuer creditworthiness, upon maturity the holder of a bond will be repaid the face value of the bond. This makes bonds attractive to investors who require stability of capital. While the market price of bonds can vary prior to maturity, they typically have a higher level of capital stability relative to shares.
BetaShares fixed income solutions
BetaShares offers several funds that provide a simple, accessible and cost-effective way to add fixed income to your investment portfolio.
As with all BetaShares funds, you can buy or sell units on the ASX using an online brokerage account or through a financial adviser.
BetaShares Australian Investment Grade Corporate Bond ETF
ASX Code: CRED
Management cost: 0.25% p.a.
Running yield*: 3.57% p.a.
Yield to maturity*: 5.33% p.a.
Average maturity*: 7.3 yrs
Average credit rating: BBB+
Distributions: Monthly
Exposure: Australian corporate bonds
CRED provides exposure to a portfolio of fixed-rate, investment grade Australian corporate bonds.
• Regular, attractive income is paid monthly, at a rate expected to be higher than term deposits and government bonds.
• Provides potential defensive benefits, as Australian corporate bonds historically have tended to rise when Australian shares have fallen.
CRED may suit investors seeking regular income and higher capital stability compared to shares, or who want to complement a holding of government bonds or hybrids.
BetaShares Australian Bank Senior Floating Rate Bond ETF
ASX Code: QPON
Management cost: 0.22% p.a.
Running yield*: 1.07% p.a.
Yield to maturity*: 0% p.a.
Average maturity*: 3.45 yrs
Average credit rating: A+
Distributions: Monthly
Exposure: Senior floating rate bonds
QPON provides exposure to a portfolio of senior floating rate bonds issued by major Australian banks.
• Income paid monthly and expected to exceed income paid on cash and short-dated term deposits. Income expected to rise should interest rates rise, and vice versa.
• Provides potential defensive benefits, as floating rate bonds historically have exhibited low correlation to equities as well as defensive characteristics during market declines.
QPON may suit investors looking for regular income and higher capital stability compared to shares, and who want to benefit from increased income if interest rates rise.
BetaShares Legg Mason Australian Bond Fund (managed fund)
ASX Code: BNDS
Management Cost: 0.42% p.a.
Running yield*: 2.85% p.a.
Yield to maturity*: 3.7% p.a.
Average maturity: 6.04 yrs
Average credit rating: AA
Distributions: Monthly
Exposure: Diversified portfolio of fixed income securities
BNDS holds an actively managed, broadly diversified portfolio of Australian government, semi-government and corporate bonds, and other eligible fixed income securities.
• BNDS’ professional, active management has the potential to add value through interest rate management and sector and security selection.
• Income is paid monthly at a rate expected to exceed interest on cash and term deposits.
BNDS may suit investors seeking attractive income, diversification and relatively high levels of capital stability.
*As at 16 May 2022. Not indicative of future performance.
BetaShares Australian Government Bond ETF
ASX Code: AGVT
Management cost: 0.22% p.a.
Running yield*: 2.28% p.a.
Yield to maturity*: 3.57% p.a.
Average maturity*: 8.87 yrs
Average credit rating: AAA
Distributions: Monthly
Exposure: Australian government bonds
AGVT aims to provide diversification benefits, defensive qualities and regular monthly income via exposure to a portfolio of predominantly Australian government bonds.
• Government bonds have tended to rise in value in periods of equity market weakness, providing potential diversification benefits .
• Income is paid monthly with relatively higher income potential due to its longer duration focus.
AGVT may suit investors seeking relatively ‘long-duration’ and high levels of capital stability and regular income as an alternative to a holding of corporate bonds.
BetaShares Sustainability Leaders Diversified Bond ETF – Currency Hedged
ASX Code: GBND
Management cost: 0.49% p.a.
Running yield*: 2.28% p.a.
Yield to maturity*: 2.94% p.a.
Average maturity*: 7.55 yrs
Average credit rating: AA
Distributions: Quarterly
Exposure: Australian and international bonds
GBND aims to track the performance of an index (before fees and expenses) that provides exposure to a diversified portfolio of high-quality bonds meeting strict responsible investment standards.
• Responsible investing – obtain exposure to a diverse portfolio of Australian and international bonds in a way that gives effect to environmental, social and ethical considerations.
• Stringent eligibility criteria – bond issuers must pass a strict ESG screening process, while green bonds must be certified by the Climate Bonds Initiative.
GBND may suit investors seeking for ‘ethical’ investment whilst enjoying regular income and portfolio diversification.
*As at 16 May 2022. Not indicative of future performance.
BetaShares Global Government Bond 20+ Year ETF – Currency Hedged
ASX Code: GGOV
Management Cost: 0.22% p.a.
Running yield*: 2% p.a.
Yield to maturity*: 2% p.a.
Average maturity: 27.91 yrs
Average credit rating: AA
Distributions: Quarterly
Exposure: Diversified portfolio of fixed income securities
GGOV holds a portfolio of high-quality, long-dated, income-producing bonds issued by some of the largest developed economies in the world, hedged into AUD.
• GGOV comprises only bonds issued by national governments from the G7 developed-market economies, providing exposure of superior credit quality.
• Income is paid monthly at a rate expected to exceed interest on cash and term deposits.
GGOV may suit investors seeking relatively ‘long-duration’ and high levels of capital stability and regular income as an alternative to a holding of Australian government bonds.
BetaShares Australian Composite Bond ETF
ASX Code: OZBD
Management cost: 0.19% p.a.
Running yield*: 2.94% p.a.
Yield to maturity*: 3.96% p.a.
Average maturity*: 7.31 yrs
Average credit rating: AA
Distributions: Monthly
Exposure: Australian government and corporate bonds
OZBD provides exposure to a portfolio of Australian corporate and government bonds selected on the basis of their risk-adjusted income potential.
• OZBD focuses on bonds with high income potential – particularly pertinent in a rising yield environment.
• Basing selection on a bond’s risk-adjusted income potential rather than debt outstanding seeks to avoid the shortcomings of traditional debt-weighted indices and aims to provide higher returns.
OZBD may suit investors seeking attractive income, portfolio diversification and relatively high levels of capital stability.
*As at 16 May 2022. Not indicative of future performance.
How to invest
As with all BetaShares’ funds, our range of fixed income funds can be bought or sold on the ASX, just like you’d buy or sell any share.
Learn more about investing in ETFsResources
BetaShares Australian Government Bond ETF (ASX: AGVT)
BetaShares Australian Bank Senior Floating Rate Bond ETF (ASX: QPON)
BetaShares Australian Investment Grade Corporate Bond ETF (ASX: CRED)
BetaShares Legg Mason Australian Bond Fund (managed fund) (ASX: BNDS)
BetaShares Sustainability Leaders Diversified Bond ETF – Currency Hedged (ASX: GBND)
BetaShares Global Government Bond 20+ Year ETF – Currency Hedged (ASX: GGOV)
BetaShares Australian Composite Bond ETF (ASX: OZBD)
About BetaShares
BetaShares is a leading Australian manager of ETFs and other Funds traded on the Australian Securities Exchange (ASX). Our aim is to provide intelligent investment solutions, to help investors meet their financial objectives.
Our range of Funds is one of the largest and most diverse available in the market. We offer investors simple, cost-effective access to fixed income, equities, cash, currencies, commodities and alternative strategies.
1 While fixed income investments carry less risk than shares, they carry a higher level of risk than cash deposits.
IMPORTANT INFORMATION
BetaShares Capital Limited (ABN 78 139 566 868, AFSL 341181) is the responsible entity and issuer of the BetaShares Funds. This information is general only, is not personal financial advice, and is not an offer or recommendation to make any investment or adopt any investment strategy. It does not take into account any person’s financial objectives, situation or needs. Before making an investment decision investors should obtain and read a copy of the relevant PDS available from www.betashares.com.au or by calling 1300 487 577 and obtain financial advice in light of their individual circumstances. Investments in BetaShares Funds are subject to investment risk and the value of units may go down as well as up. Past performance is not an indication of future performance. The performance of BetaShares Funds is not guaranteed by BetaShares or any other person. To the extent permitted by law BetaShares accepts no liability for any errors or omissions in, or loss from reliance on, the information herein.