Enhancing Australian Fixed Income Indexing

For many Australian investors, traditional fixed income is a challenging asset class to navigate, which has led to an over-reliance on broad, simplistic market indices that are arguably inefficient as an investment strategy or for performance benchmarking.

The two main culprits causing the inefficiencies in these traditional benchmarks are liability-weighted indexing and the inclusion of bonds with less than one year to maturity.

To address these shortcomings, in partnership with Bloomberg, Betashares has co-developed the Bloomberg Australian Enhanced Yield Composite Bond Index, which the Betashares Australian Composite Bond ETF (ASX: OZBD) aims to track.

In this paper we discuss why we assert that this index provides a superior and more optimised solution for benchmarking fixed-rate bonds denominated in Australian dollars (AUD).

Read the full paper here.